Driving past the Cape Town CBD these days, it’s hard not to notice the myriad cranes and construction vehicles lining the streets of the Foreshore as the newest office buildings rise up steadily from their foundations and change the mother city’s skyline forever.

The property boom that has taken place in downtown Cape Town is an excellent opportunity for developers and commercial property tenants alike, as the city’s rental stock is set to increase substantially – but what does this mean for the property market as a whole?

The biggest commercial property boom in decades

Long-time residents of Cape Town may still recall a time, roughly 15 years ago, when the CBD had gained an unfortunate reputation as a ‘no go zone’ for commercial property investors.

Crime, litter, and deteriorating building maintenance, as well as the superior office and retail space available at the V&A Waterfront had drawn many top tier commercial tenants away from the centre of town.  Today, however, the situation could not be more different.

The city’s decade and a half-long regeneration is finally starting to bear fruit for the property sector, with total investment in the CBD standing at R24 billion this year.  As a result, construction is booming.

Portside, the best-known CBD construction project completed in the past few years has become a Cape Town landmark with its glass facade and innovative design.  The new Media 24 building and Chris Barnaard Hospital, the CTICC’s expansion, and the Towers development on Hertzog Boulevard are all underway and look set to transform the Foreshore area into a thriving modern business district.

How new developments may affect the commercial property market

Unlike residential property which caters for a mix of prospective buyers and tenants, commercial property is often a rental-dominated sector.  With the new commercial properties out of reach for many companies where purchasing is concerned, the fresh stock of rentals that are set to become available will provide much-needed A grade office space in the CBD.

This may have several consequences for commercial office space in Cape Town:

  • Prospective tenants may decide to relocate from their current premises in the CBD to the Foreshore, creating vacancies of B and C grade office space in older buildings.  This may present an opportunity for smaller businesses to access affordable commercial space if prices in older buildings begin to fall.
  • A temporary high vacancy in new buildings may exist at first, especially with the current slow economy.  Prime commercial property will need to be competitively priced and must offer value to prestige clients if high occupancy rates are to be achieved.
  • The development of new mixed-use buildings in the CBD means that demand for premium residential property may also increase.  A general upward trend may be expected, with larger businesses and higher net worth individuals moving into the newer parts of the city centre.

With a bigger variety of rental stock available to businesses of all sizes, the effects of the current high-paced development in the Cape Town CBD seem positive all round.  However, estate agencies will need to be proactive in securing tenants for buildings of all kinds in order to prevent a slump in the market for B and C grade buildings.

As the newest commercial buildings in Cape Town near their completion, Commercial Space looks forward to serving clients with a range of excellent rental and purchase options.

Sources Consulted


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