Cape Town’s Central business district (CBD) decisively turned a corner in 2023. The inner city’s performance metrics, as reported in the State of Cape Town Central City Report 2023 – A Year in Review (SCCR), published annually by the Cape Town Central City Improvement District (CCID), cemented its position as world-class commercial hub.
It is clear that numerous groups believe in the Mother City’s investment case. Business and local government work well in tandem to promote Cape Town as the Western Cape’s centre of where to “live, work and play”. The positivity emanates from the CBD and City of Cape Town officials including Executive Mayor Geordin Hill-Lewis and his team. The City’s efforts are supported by the likes of the CCID, with both bodies working to create a clean and safe downtown which is economically and socially vibrant.
A significant indicator of investor confidence is the sustained growth in the overall official value of all property in the inner city which has increased from R6bn in 2006 to R42.8bn in 2023, according to the City of Cape Town’s property valuation.
A SOARING CITY
The SCCR report shows that the CBD has rebounded from the persistent economic pressure around the pandemic and global economic uncertainty with a boom in property investments. The investment confidence stands out across the country with the report showing that the total value of property development in the CCID’s footprint in 2023 exceeded R7.285bn, an increase of more than R3.730bn compared with 2022.
Other key economic sectors are also driving the Cape Town inner-city economy, including business tourism, hospitality, luxury hotels, eventing and entertainment and a diverse retail industry which attracts numerous markets. These also showed a strong rebound in 2023 with momentum likely to continue across 2024.
A total of 30 property developments or redevelopments were recorded last year. The SCCR details these residential, commercial, mixed-use, retail, aparthotel and parastatal developments and redevelopments that were completed, under construction, in the planning phase or proposed in 2023.
As many as nine were completed and valued at more than R1.347bn. Eight were under construction and were worth a combined R2.228bn plus. As many as 10 were in the planning phase and expected to be worth more than R2.610bn. Three were proposed, conservatively estimated to be worth more than R1.1bn together.
Of the 30 developments, 40% were residential builds, followed by mixed-use builds which include a mix of commercial and residential elements.
Cape Town’s inner city not only attracts businesses which are seeking office space but also people who want to live there. Being able to live near one’s workplace cuts down travel costs. Well-run cities include this functionality around the world. The strong demand for inner-city accommodation is ongoing. The residential developments are set to add thousands of new units to the Cape Town CBD’s residential property market.
Rob Kane, CCID chairperson and CEO of Boxwood Property Fund, which operates out of The Box in the CBD, says the CBD had once again outdone itself.
“I believe that our CBD works because of years of hard work. We have developed expertise over time. Things didn’t start to work better overnight. The investment which we see is extraordinary for an area of only 1.6 km² in a country with a subdued economy. It will significantly increase the economic growth and dynamic mix of the CBD and enhance its reputation as South Africa’s most successful inner city,” he says.
Cape Town’s skyline is evolving. Numerous developments are adding new elements to a vibrant city. These include the slick R600m mixed-use skyscraper, The Rubik, designed to resemble a Rubik’s Cube; Neighbourgood 84 Harrington, which is worth R180m, and is the world’s tallest aparthotel to be constructed from hempcrete blocks; and The Barracks, a R150 m Heritage development in one of the world’s coolest streets: Bree St.
COMMERCIAL DEVELOPMENTS
Kane explains that the CBD is a work hub for numerous big corporates and companies who want to be at the crux of the Western Cape economy.
There were five new commercial-only developments in 2023, while seven mixed-use developments also included offices. This increased offering coupled with a decline in office vacancy rates, reflects a renewed interest in office space driven by the economic recovery of the Central City and a trend towards employees returning to the workplace.
Landlords who spent time upgrading their offices, especially during the pandemic, are now drawing tenants that are performing well and are reliable rent payers. The office vacancy rate in the Cape Town CBD at the end of 2023 was 10.2 %, which is an improvement from the 13.3 % recorded in 2022 and the 16.1 % recorded in 2021.
The CBD still has the largest share (+39.4 %) of the total office space in the city of Cape Town, as measured by the SA Property Owners’ Association (Sapoa).
“It also shows how resourceful and innovative Cape Town commercial landlords have been in creating pleasing work environments for tenants in a bid to entice workers back to the office,” says Kane.
Data in the latest SCCR shows a strong improvement in the office vacancy rate, with the city of Cape Town as a whole recording the lowest office vacancy rate of 7.5 % among South Africa’s major municipalities. This is the lowest vacancy rate recorded by the city since 2019, despite an increase in the real inflation-adjusted asking rate of commercial rentals across all office grades in 2023.
While the CBD has one of the highest office vacancy rates in the metropole, vacancy rates in all office grades in town, except B-grade, improved beyond pre-pandemic levels.
RESIDENTIAL BOOM
Persistent demand for additional residential units in the Central City will be somewhat alleviated by 12 new residential property investments made in 2023, and additional residential units in seven mixed-use developments and three aparthotels.
Nine developments were completed last year, valued at R1.347bn together. Of these, three were residential builds valued at R280m, with two more under construction. The completed builds included two residential complexes in the inner city in Loop Street: the R70m apartment block The Carrington and The Tokyo, worth R150m. The other development, Vida d’Chette, worth R60m, provides flexible leasing on the Foreshore.
Six residential buildings are in the planning phase with a combined value of R915m. Additionally, two mixed-use buildings were finalised in 2023, with another under construction and four in the planning or proposal phases. One of the planned mixed-use developments gaining much attention is Mama Shelter Africa, which will see the international hotel brand reimagine the old City Park building and redevelop it into branded residences, and office and retail space set to reignite investment in the hospitality and retail sector.
Wayne Troughton, CEO of HTI Consulting, says this is pleasing given that Cape Town is facing a shortage of hotel space.
“There is so much demand for all kinds hotels. Groups are competing for space as they try to enter the market. The city is also really in need of new a luxury hotel as more tourists arrive on our doorstep. Our season has also been extended. Tourists used to typically start coming in October with the season ending in March. Nowadays, they visit from mid-August until May. We are seeing a greater variation of tourist. People have chosen to visit Cape Town regularly and at different times of the year.
RESIDENTIAL SALES
The report reflects an increase in the total number of residential units in the CBD to an all-time high of 7 188 apartments in 2023, up from 6 827 in 2022 and 5 791 in 2021. The average purchase price of sectional title properties increased 7.2 % to R1.58m compared with R1.47m in 2022.
RETAIL PROVES RESILIENT
One of the key business sectors, namely retail – which makes up 1 305 of the 3 302 entities doing business in the Cape Town CBD – once again increased its footprint in 2023, with more than 62 new retail outlets opening their doors.
Despite ongoing economic challenges and rolling power cuts, retail confidence in the Cape Town CBD, as measured in the CCID’s quarterly Business Confidence Index, also rose steadily in 2023. By the end of the year, an impressive 93.0 % of retailers surveyed indicated they were “satisfied” with current business conditions.
According to the SCCR, the total volume (m²) of retail space available in the Cape Town CBD in 2023 amounted to 262 815 m², marginally lower than the 271 209 m² recorded at the end of 2022. Meanwhile, the total retail space occupied across the CCID’s footprint in the CBD in 2023 amounted to 247 023 m², a marginal decline of just over 11 000 m² from the 258 024 m² recorded in 2022. The total vacancy rate of retail space in the Cape Town CBD – 15 792 m² – amounted to just under 6.0 % of the total retail space available. In 2022, the total vacancy rate was 4.9 %.
“The higher vacancy rate is caused, in part, by a decline in the total retail space available due to the redevelopment of retail space in Strand St, namely the R200m retail development, The Mutual,” Kane says.
A BRIGHT FUTURE
The CBD is an attractive place in which to live, work and play. At least 10 of the 17 business sectors that operate in the Cape Town CBD experienced growth in 2023 with the number of business entities overall increasing by 186, from 3 116 in 2022 to 3 302 in 2023.
Of these, the top five that recorded a positive output were retail; general corporates and head offices; ICT, telecoms and call centres; finance, investment, insurance and banking and artistic studios.
“The CCID partners with the City of Cape Town and the South African Police Service (SAPS) to safeguard the Central City and ensure its status as the most economically sound city centre in the country. Cape Town’s top good governance ranking, coupled with the CBD’s booming property sector, make the Mother City an exceptionally attractive investment destination,” says Kane.
The CCID is a non-profit private-public company whose mission includes promoting Cape Town as a leading business and property investment destination. Established in 2000, the CCID was the first legislated City Improvement District of its kind in Cape Town. It is the largest CID in the country and the only one to preside over a city CBD. Funded by property owners, the CCID provides top-up services to those offered by its partners – the City of Cape Town and SAPS – in the area of safety and security, urban management and social development. It operates in a specific 1.6 km² geographical area in the CBD.
alistair@propertyflash.co.za
