Cape Town CBD’s R3 billion boom

The value of property development in Cape Town’s CBD has skyrocketed over the past few years. In 2023, the total value of property development exceeded R7.29 billion – an increase of R3.73 billion from the previous year.

This is according to the State of Cape Town Central City Report 2023 (SCCR), published by the Cape Town Central City Improvement District (CCID), which said confidence in the Cape Town CBD’s investment potential is high.

Aside from an increased value of property development, other key economic sectors that drive the Cape Town inner-city economy – business tourism, hospitality, eventing and retail – also showed a strong rebound.

These findings were made in the latest edition of the prestigious State of Cape Town Central City Report 2023 – A Year in Review (SCCR), published annually by the CCID. 

The findings of the 12th edition – released to Cape Town business and property leaders this morning – reflect on the state of downtown Cape Town’s economy during the previous year.

A total of 30 property developments or redevelopments were recorded last year –

• Nine were completed and are worth more than R1.35 billion
• Eight were under construction and are worth more than R2.23 billion 
• Ten were in the planning phase and were worth more than R2.61 billion
• Three were proposed and are worth more than R1.10 billion 

Twelve property developments were residential builds, followed by mixed-use builds, indicating that 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,” the report found.

Research in the latest SCCR shows that 2023 was the year the Cape Town CBD “decisively” turned the post-Covid corner, said CCID board chairperson Rob Kane.

“It’s evident from the report that the Cape Town CBD, unlike its other South African counterparts and many around the world, has rebounded markedly post-pandemic, with the regrowth and stability it showed in 2022 continuing well into 2023,” Kane said.

“This bodes well for the future of Cape Town and its CBD.” 

He said the most 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 R12.2 billion in 2016/17 to R42.8 billion in 2023.

Kane said that apart from the construction sector’s impressive growth, other key economies that drive business and investment into the Cape Town CBD that also showed a strong performance were business tourism, hospitality, eventing and retail.

At least 10 of the 17 business sectors operating in the Cape Town CBD experienced growth in 2023, with the overall number of business entities increasing by 186, from 3,116 in 2022 to 3,302 in 2023.

Of these, the top five that recorded positive output were retail, general corporates and head offices, ICT, telecoms and call centres, finance, investment, insurance and banking, and artistic studios.

Retail – one of the key business sectors that makes up 1,305 of the 3,302 entities doing business in the Cape Town CBD – 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 State of Cape Town Report 2023, the total volume 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 R200 million retail development, The Mutual,” Kane said. 

The report further found that there was fresh demand for office space in Cape Town CBD in 2023, leading to a decline in the office vacancy rate.

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.