Cape Town’s central business district (CBD) attracted R3.55 billion in property investment in 2022, including new developments and redevelopments, with the city benefitting from good governance and semigration from South Africa’s inland areas.
This was revealed in the 11th edition of the State of Cape Town Central City Report for 2022, published by the City of Cape Town (CoCT) on Wednesday.
The city’s CBD quickly recovered from the Covid-19 pandemic in 2022 as businesses returned to the city bowl.
However, in 2021, the city attracted R5.71 billion in property investments. This decline was attributed to rising interest rates and a stagnant national economy.
Chair of the Cape Town Central City Improvement District (CCID) Rob Kane told Business Day that the prevailing economic environment in the country makes it difficult to do business. Despite this, the CBD continued to attract investment.
Kane said this trend would likely continue due to the city’s good governance, reduced load-shedding versus the rest of South Africa, and semigration from inland provinces.
He initially thought that semigration was a fad that would dissipate. However, he said Cape Town is experiencing real migration of skilled people from other parts of the country and digital nomads, who boost the city’s skills base.
“Businesses and people will continue to relocate to Cape Town because it offers an unrivalled lifestyle and is business-friendly,” said Kane.
The office sector in the central city was steady in 2022, with vacancies decreasing for top-tier A-grade space.
The return of businesses to the CBD led to higher rental prices for high-quality office space, with some rental prices exceeding R200 per square meter.
The CBD has the largest share of office space in Cape Town, at nearly 40%. It also has the second-largest share of premium office space, after Century City, with 29.8%.
The R3.55 billion invested includes projects under construction, completed, planned, and proposed, including 44 commercial, mixed-use and residential projects.
Some notable projects were the Wale Street Chambers redevelopment, the Neighbourgood Reserve redevelopment of an 18th-century building, and the Telkom Exchange development.
Cape Town outperforms Joburg, Durban
Cape Town saw a 13% increase in rental prices in the second quarter compared to the same period in 2022. On a national level, rental prices for high-quality office space only increased by 3.5%.
This is according to the Q2 2023 issue of Rode’s Report on the South African Property Market.
The report noted that there has been a shift towards more people returning to the office, although hybrid working policies, like working in the office for three days, are still popular.
This means the demand for office space remains lower than before the Covid-19 pandemic. When adjusted for inflation, the current rental prices are still 3% lower than in 2019.
Cape Town has performed the best in terms of rental growth, with a 13% increase in rental prices compared to a year ago.
Pretoria and Johannesburg also saw some rental growth, but it was lower. Durban, on the other hand, experienced a decline in rental prices.
Regarding nominal changes, Tyger Valley saw the largest increase in rental prices, jumping 21.2% from four quarters earlier. This number translates to an impressive 10.4% in real terms.
Century City, Cape Town, also saw significant growth of 10.9% in nominal terms and 0.9% in real terms.
Centurion in Gauteng also saw significant rental price improvement, growing 12.7% in nominal terms and 2.6% in real terms.
According to the report, the future of the office market is uncertain due to a poor economic outlook and the remote working trend.