Cape Town CBD remains top destination for Corporate Head Offices
The Cape Town Central Business District (CBD) remains a popular precinct for many corporate head offices, including large blue-chip financial institutions and legal firms.
The city has a mix of old and new buildings, including some of the most beautifully renovated properties in the country. The recently developed Taj Hotel, which is a converted heritage office building situated in the historic part of Cape Town, is an excellent example of this.
The recently published report by Broll Property Group on Cape Town CBD Office Market for December 2012, reveals the market is tenant driven with A-grade rentals having levelled off at R95 since 2011. However, in some instances they have reached R120. Vacancies have been increasing substantially since 2008, this is because of new space coming online and companies moving out of the CBD to Century City. But vacancies have started moving downward since the middle of 2012.
However, the CBD seems to be holding its own. Enquiries and demand for space, particularly in the 100 – 400m2 range, are coming in and deals are being signed.
Office users are aware of market related rentals. A trend has developed where existing leases that have been running for several years with annual escalations may in fact be above market-related rentals. In these instances landlords are pressured to reduce rentals once the lease comes up for renewal, and those that don’t often find the tenant moving.
Demand for B- and C-grade properties is low. A- to Premium-grade offices are in greater demand however also rental dependent. Tenants are extremely rent sensitive and with vacancies slowly creeping upwards many landlords have been re-negotiating their rentals to ensure their buildings remain full or with minimal vacancies.
Companies from small to large wish to purchase their own premises to own and occupy, they seem to see value in owning their space. This has been assisted by banks providing mortgages up to 90%.
General information
More than R14 billion was spent on infrastructure in Cape Town for FIFA World Cup 2010. This included the new Cape Town Stadium, Green Point Urban Park, the upgrade of the Cape Town Station, the first phase of the Integrated Rapid Transit System, new pedestrian walkways, public open spaces, and the upgrade of Cape Town International Airport. The long-term benefits are now being enjoyed by landlords and tenants in the CBD. An interim MyCiTi service running between the CBD and Table View commenced in May 2011 and is being well patronised.
Even though there is very limited land available for development in the CBD, a number of ventures are underway. These include the 22 Bree Street development by Abland, Atlantic Centre in Christiaan Barnard Street (old Oswald Pirow Street) by Ingenuity Property Investments and the 57 000m² Portside Building of which occupation is expected around mid-2014. FNB is taking about 15 000m² in this building. A number of developments are being planned in the V&A Waterfront. Developers tend to secure 50% of leases prior to breaking ground.
A variety of buildings in and around the CBD have been refurbished in the last 24 months and this trend seems set to continue. The conversion of office space to residential apartments also continues, albeit at a lower level than before. Ingenuity has just purchased Newspaper House which they are currently refurbishing. Once completed in November 2012 Atlantic Centre near Culumborg will provide 10 000m² of premium-grade office accommodation.
The Central City Improvement District (CCID) is very active in the city and has been successful in keeping the city centre safe and clean. They have been instrumental in Cape Town being named World Design Capital for the year 2014.