Cape Town is regularly ranked in the global top 5 tourist cities, but how does the Mother City’s commercial property sector compare to other world-leading cities? In this article, we compare Cape Town to several established and up-and-coming cities to find out how it measures up.
Robust demand despite a slow economy
The slow growth of South Africa’s economy has been making headlines lately, but Cape Town has remained resilient. The Mother City’s commercial properties boast the lowest vacancy rate in the country at just 7.6%. This compares favourably to the 10% average across all South African cities.
From a global perspective, the low vacancy rate in Cape Town is also impressive compared to cities in other developing countries. While Beijing and Shanghai currently have vacancy rates lower than Cape Town’s, at 6% and 5% respectively, the vacancy rates in Delhi(10%), Bengaluru (16.1%) and Mexico City (19%) are all significantly higher.
Cape Town’s low vacancy rate indicates that demand for commercial property is solid in the city. While new buildings are opening every year, property owners seem to have little trouble finding eager tenants for their premises. This trend bodes well for commercial property developers in Cape Town as the city’s building boom shows no sign of slowing down anytime soon.
Excellent return on investment still lures buyers
Return on investment as measured by prime yield is currently 8% in Cape Town. This is significantly higher than the prime yield in many first-world cities and is also higher than most cities in China.
India’s three fastest-growing cities achieved higher prime yields than Cape Town last year, recording figures of between 9.5% and 10.5% last year as the country’s economy expanded by 7.1%. However, considering the muted growth in South Africa’s economy, the prime yield in Cape Town is extremely competitive compared to other BRICS nations.
The resilience of Cape Town’s commercial property sector is proof of the fact that investors have confidence in the local property market. From a long-term perspective, property investors are setting themselves up for excellent returns in a city that has seen itself transformed in recent years.
Cape Town Commercial Property in a Nutshell
The latest property statistics on Cape Town paint an excellent picture of the city’s commercial real estate sector. Here are some of the most important figures for 2016:
- Vacancies fell to 7.6% – the lowest in South Africa
- Prime gross rent has reached R180 per square metre per month
- Grade A and P properties achieved a year-on-year growth rate of 8% last year
- The city currently has 2 495 000 square meters of gross leasable area
- Vacancies have remained constant despite a number of new buildings having opened
- The City fares well internationally
Considering the economic challenges facing South Africa, Cape Town’s commercial property sector has managed to outperform many cities in developing nations in terms of prime yields, vacancies and annual growth. This positive trend, combined with an economic rebound, could set the stage for excellent long-term growth in the city.