As South Africa faces a slowing economy, Cape Town’s robust growth and positive reputation among investors has allowed the city to weather the downturn – but what does this mean for commercial rentals in the city?
A growing economy and new business start-ups go hand in hand, with newly established companies and entrepreneurs on the lookout for premises – especially if they have plans to expand their operations. For commercial property owners and agents, this is definitely good news.
The biggest question at the moment is – where exactly will new tenants come from, and what industries should we be watching for growth during 2016?
The short term hold
It’s worth noting that although Cape Town is experiencing growth, businesspeople in the city are all too aware of the challenges facing the SA economy in the short term.
This has led some established businesses to put their expansion plans on hold as they consolidate their gains of the past few years and adopt a wait-and-see attitude in 2016.
For new businesses, however, the need for professional premises that are large enough to house their operations – while still conveniently located, can’t be ignored. These are the clients that are likely to sign new leases this year.
So Who is Moving in – Tech, tourism, and. TVs?
Recent media reports paint a good picture of investment in the city’s commercial sector. The weaker Rand helped Cape Town to enjoy a bumper tourist season at the end of 2015, while large investments – including the new Hisense television factory in Atlantis and a wave of tech and media start-ups showed a positive investment in our economy.
As momentum in the media, technology and tourism sectors continues, it’s likely that creative studios, shared workspace, industrial consultants, and fully-fledged tech firms may become the commercial property tenants of the near future.
Tenants for a wide range of buildings
If the creative and tech industries are set to be the big movers in Cape Town’s economy this year and beyond, it’s important for commercial property specialists to understand the nature of these industries – and the variety of companies and entrepreneurs that are involved in them.
The technology sector consists of differently-sized businesses, from one-person consulting firms to the larger group. For commercial real estate agents, this is all good news – as long as each tenant can be matched to premises that suit their budget and requirements.
Compared to established companies that have fixed long-term goals, small tech firms may not be able to predict where they’ll be in 18 months from now. This has an impact on the type of premises and lease that these clients will feel comfortable signing – as a general rule, shorter leases with greater flexibility are well-suited to tech entrepreneurs.
As long as commercial property owners are willing to negotiate on the terms of their leases, it may be possible to secure tenants in buildings that are often overlooked by many clients – this includes renovated older buildings and warehouses that have been converted into office space.
Final word – 2016 looks good on many fronts
With new businesses opening in Cape Town and demand for commercial office space set to rise, there are many reasons to look forward to the rest of 2016.
By understanding who our new tenants are and what they require, agents and owners will be in the best position to conclude valuable lease agreements this year.