Doing business in Cape Town: Demand for office space back at pre-pandemic levels

A number of positive developments in the Cape Town business environment are creating a bright future outlook for the city.

A wave of semigration has seen thousands of families and business owners from across the country relocate to the Mother City, and this exciting phenomenon is starting to be felt by the commercial rental market.

An influx of business owners, along with the decentralisation of corporate offices in the Western Cape is creating huge demand for office space, with retail and warehousing following suit.

In this article, we give potential business migrants a look at the commercial property landscape in Cape Town, including some of the areas showing the highest demand, and find out why the city is well positioned to become Africa’s premier business destination.

Demand for office space reaches pre-pandemic levels

One of Cape Town’s superpowers is bucking negative national trends – and a prime example of this is the uptick in demand for commercial property.

While major metros in the country are struggling to recover from the economic effects of the Covid pandemic, the Mother City seems to have left the memories of lockdowns behind as commercial buildings fill up.

Semigration, coupled with the Western Cape’s superior economic performance and overall excellence in service delivery, has seen a huge increase in the number of businesses operating in the province.

Since Cape Town is the economic hub of the region, the demand for commercial property is most acute in the Mother City.

Several key areas are currently experiencing a boom in new commercial developments to meet surging demand for office space.

Newlands offers a central location in the southern suburbs with access to the UCT area that hosts thousands of students from around the world. The area is already home to many small businesses and professional service providers.
Durbanville is the gateway to the Boland and is an ideal location in the northern suburbs with quick access to Cape Town international airport.
Gardens combines proximity to the CBD with the comfort and security of a leafy suburb, making it ideal for small businesses and consultancies
Muizenberg has undergone a remarkable transformation, shedding its reputation as a sleepy seaside village to become a trendy location for startups in a variety of industries.

A commercial property in any of these areas would be ideal for semigrants moving their businesses to Cape Town – and securing one sooner than later could be a wise strategic move.

Will low vacancies continue through 2024?

The Cape Town property market has been heating up significantly over the past year, but the exceptional growth that we have seen is admittedly in sharp contrast to the country’s overall economic situation.

Despite excellent resilience in the Western Cape, national economic issues like load shedding will still have an impact on Cape Town, leading some property analysts to predict that the market may lose steam later this year.

Looking back at the commercial property market over the past few decades, during which time the Commercial Space team has placed countless businesses in premium office buildings across the peninsula, it’s extremely difficult to know if the economists’ and property analysts’ predictions will come true.

In our view, there are two possible scenarios – both of which could be good for Cape Town’s commercial property sector:

1. The market slows down

This will give business owners who have semigrated to the province an opportunity to secure business premises at competitive rates while developers have a chance to complete their projects and increase the supply of rental units in the city.
Unlike other metros where the local economy is severely depressed, the Mother City’s impressive performance will likely resume quickly in 2024 at which point vacancies should drop once again.

2. The market charges ahead

- In this scenario, the sheer number of business owners moving to the province will occupy the available office units, causing prospective tenants to look further afield than the traditional areas such as the CBD and Century City
- Fortunately, the number of developments in previously quiet regions of the city – like those we outlined in the previous section – should provide excellent choice for small business owners.

Great rental returns: a dynamic long-term trend

The commercial property market continues to grow at a healthy rate in the Mother City. In fact, it Cape Town currently outperforms all other regions in SA.

While rentals continue to decline nationwide, Cape Town reported 7% growth in early 2023 according to the latest Rode’s report. This was the highest of any region.

In addition, Cape Town was the only region with inflation beating rental growth over the past year.

Cape Town’s popularity as a business destination isn’t sheer luck. The region’s superior service delivery and liveability are attracting investors from other provinces and abroad – and the local government is just getting started.

The Ease of doing business in Cape Town

Cape Town mayor Geordin Hill-Lewis has his sights set on a major achievement: making the city Africa’s premier business destination.

Speaking to journalists recently, he emphasised the fact that the Mother City is now competing with the entire continent and not only metros like Johannesburg and Durban.

To help attain the status of Africa’s number one business capital, the city has created ten critical indicators for Ease of Doing Business:

Building plan approvals
Getting land use rights
Getting electricity
Connecting to the water network
Rates clearance certificates
Informal trading permits
Digitisation of city services
Permissions to lay fibre internet cables and pipelines
Public land transfers
Obtaining a business licence

Taking a critical view of the list, these priorities may not include load shedding reduction and efficiencies at the harbour and other public facilities, but Hill-Lewis says there’s a good reason for that.

The city only has partial control over electricity supply, the police force, and transportation systems, with national government controlling some aspects of those services.

What is clear from the Ease of Doing Business Index is that the local government takes efficient construction approvals and oversight very seriously. This is excellent news for property developers and ultimately building owners and tenants alike.

Ready to semigrate? We’re ready to find you the ideal office space

Cape Town is the country’s most stable and positive environment to start or relocate a business in 2023. The Commercial Space team is ready to assist business owners from other regions as they make the move and set up operations in the Mother City.

We would love to hear from you and learn more about your office space needs. Contact our team of area specialists today.