Despite numerous challenges and disruptions, Cape Town’s commercial real estate market has burgeoned during the past 18 months, growing steadily, with demand now outstripping supply in the most sought-after areas, especially those nearest the city.
"It’s currently an outright seller’s market in Cape Town," says Brent Townes, Commercial Property Chief Operating Officer for Lew Geffen Sotheby’s International Realty in Cape Town adding that whilst it presents lucrative opportunities for those looking to sell, it also challenges prospective buyers to navigate a competitive landscape.
"The market’s upward trajectory has been driven by several factors, including the city’s status as a global business and tourist destination, business semigration and increased investment in infrastructure which have underpinned a notable upward trend in sales volumes."
According to year-on-year data from the Deeds Office for 54 suburbs in Cape Town, for the 12 months ending:
- December 2022, 777 units had been sold at an average sale price of R7,762 million and a combined sales value of R6,031 billion.
- March 2023, 959 units had been sold at an average sale price of R6,932m and a total sales value of R R6,648 bn.
- June 2023, 1155 units had been sold at an average sale price of R6,434m and a total sales value of R7,432 bn.
"Sales volumes therefore increased by a solid 20% and 23%, and sales units increased by 11.8% and 10.2%," says Townes.
"The average sales price declined by 7,1% and 10,6% as owner occupiers continue to hunt value and stock remains limited in the disposal market and also the major properties have been taken up by the REITs and investors with big cheque books."
Townes notes that warehouses and logistics buildings of over 5000m² are already in very short supply, while anything over 10 000m² in good locations are virtually impossible to buy or rent.
"These shortages are difficult to address because zoned and serviced land in close proximity to the metro has become increasingly scarce with very few exceptions, namely the N7 corridor and a few smaller stands of around 40 000m² in Elsie’s River with most major parks having utilised their bulk allocations.
READ: A guide to securing commercial property financing for entrepreneurs
"The only real exception is further afield up the West Coast in the Vredenburg-Saldanha area where industrial land is still freely available but the distance from Cape Town International b Airport and the harbour are a deterrent for many businesses."
"And, although the proposed new Fisantekraal Airport and precinct could alleviate this pressure, it won’t be for some time yet as the land will take two to three years to rezone, apply for and secure rights and only then will construction commence."
Despite the current eco-political climate in South Africa, Townes doesn’t expect the burgeoning commercial market in Cape Town to slow down any time soon – if anything, he expects the opposite.
"Cape Town not only has a high service delivery rating, it also experiences less loadshedding than the rest of the country and, with the local government on track with their scheme for commercial property owners to supply own solar generated power back to the local grid, the future is certainly looking brighter here in the Cape."
READ: 7 mistakes to avoid when signing a commercial lease
In an article published in May, High Street Auctions Director Greg Dart, said it’s crucial for landlords to invest wisely; prioritising digital systems that significantly improve the work environment or provide long-term cost benefits.
Dart, who has specialised in commercial real estate for more than a decade, has a landlords’ shortlist of technology investments that will attract the right tenants and maximise rental revenue.
The top tips:
Connectivity
"Top of the list is installing convenient plug-and-play infrastructure for high-speed internet access, which tenants demand from Day 1 in new premises.
"With every business now relying on cloud-based services and video conferencing, high-speed internet is a competitive necessity.
"Offering fast and reliable connectivity that’s available in every space in the building isn’t an optional expense for landlords anymore and the lack of it will show in vacancy rates."
Energy
Dart says there are two aspects landlords should consider – renewables and intuitive smart systems.
"With the ongoing Eskom crisis, a huge selling point is offering renewable energy technology that keeps offices operational during load-shedding.
“Renewables also help reduce costs and carbon footprint, and appeal to tenants who are environmentally conscious by choice or corporate policy.
"Solar panels, wind turbines and geothermal systems are all examples of renewable energy technologies that can be used to power commercial buildings and offer uninterrupted power supplies."
Certain smart, intuitive energy systems can also cut costs for landlords and tenants, one of the most beneficial being motion-activated lighting.
Security
Dart says advanced security systems are essential investments in high-crime countries like South Africa.
"They keep assets safe for both landlords and tenants, which is especially important for businesses that handle sensitive data.
"Good investments for landlords include access control systems, surveillance cameras with off-site back-up, perimeter security and intrusion detection systems."
READ: Essential security tips for estate and complex owners to keep in mind
Smart Buildings
Dart says if landlords have covered the top three on the list, another investment they should consider is smart building technology.
"Smart building systems can help landlords manage their properties more efficiently and effectively, reducing operating costs while improving the tenant experience.
"For example, installing climate control systems can help landlords cut energy costs; at the same time providing tenants with greater control over their workspace.
"Another aspect is offering online portals for tenant management. Online portals allow tenants to pay rent, report maintenance issues, and communicate with the landlord or property manager, all from the convenience of their computer or smartphone.
"This can save landlords time and resources, while also improving tenant satisfaction."
Dart says in the post-Covid market with office vacancies still high, commercial property tenants are spoilt for choice.
"By making the right technology investments, landlords can future-proof their properties and stay ahead of the competition. This short-term expenditure will pay off handsomely in long-term revenue gains."
Want all the latest property news and curated hot property listings sent directly to your inbox? Register for Property24’s Hot Properties, Lifestyle and Weekly Property Trends newsletters or follow us on Twitter, Instagram or Facebook.
Print
