Cape Town - With interest rates set to stabilise and even decline, Cape Town could see a property boom, especially in the commercial sector.
Grant Elliott, COO of Thibault Investments, who is also on the board of the Cape Town Central City Improvement District (CCID), foresees a stable year of recovery for the Cape Town CBD property scene.
He said with fewer people working exclusively from home, there’ll be some stabilisation of the office market.
Dave Russell, Director: Commercial Division of Baker Street Properties, agreed and said that the demand for office space meant strong prospects for rental growth, which would hopefully prompt more office development, breaking the cycle of a depressed development pipeline.
Rob Kane, CEO of Boxwood Property Fund and CCID board chairperson, predicted that good office accommodation would soon be in short supply. “Vacancy trends picked up by the SA Property Owners’ Association (Sapoa) show that vacancies in town are dropping like a stone.”
He said tenants were favouring buildings that were new, renovated or redeveloped. “Tenants are far more conscious of the quality of their work environment than before, and this desire for good quality spills out on to the street … landlords who have invested in the landscape surrounding their buildings by installing plant boxes, plant trees and creating outdoor cafés spilling on to the street have seen a return on this investment in the form of higher office rentals.”
With the pandemic well and truly behind us, corporates now expect employees to work from the office at least three days a week, on average. Rob Kane said the Cape Town CBD “seems to be top of the pile when it comes to people wanting to return to the office”.
“This is evident from the stats we are getting from Boxwood’s parking garages which are fuller now than they were pre-Covid-19, and there are new retail venues such as eateries and coffee shops opening up in town all the time.
“Our anecdotal evidence is that people are coming into the office three or four days a week. We have noted, however, that when they do come in, they want their own desk. The notion of desk sharing has not gained traction.”
Kane said the more “progressive” companies were encouraging their staff to come back to the office, “which is ironic as much of the Covid-19 dialogue centred on progressive companies encouraging staff to Work From Home”.
Elliott said large call centres, and the Business Process Outsourcing (BPO) sector as a whole, would continue to take up significant commercial space.
Russell agreed, saying: “Demand from the BPO and e-commerce sectors has played a major part in reducing office vacancies from their highs during Covid-19. We are now back to, and in some cases, surpassing rental levels achieved pre-Covid-19.”
Russell said that in the last few years, he had seen residential property prices and rentals increase due to semi-gration driven demand. “I understand there has been significant rental growth for apartments in and around the Cape Town CBD in particular.”
Elliott said 2024 will see a big trend of residential development and redevelopments, with CBD residential sales being predominantly investment-based.
This year will also see a big focus on short-term stay offerings, including hotels and aparthotels. Several shortterm stay developments have either been completed in the city centre (including Habitat at 132 Adderley), or are nearing completion (including The Rubik, a mixed-use block at 17 Loop Street.
“The big one is the completion late last year of a 3 000-bed student accommodation development by ERIS at the Cape Town Station,” said Elliott.
Should forecasts of a declining interest rate come to fruition as inflation stabilises, it’s likely many firsttime buyers will pounce on the chance to get a foot on the ladder.
2024 will more than likely see property demand pick up, which will have a knock-on effect on house price growth. The current “good value” real estate opportunities have an expiry date as the market upswings.
Elliott said the CCID would continue to provide sustained support to its partners across the city centre.
“The CCID, by its nature as a public-private partnership, serves to secure, preserve and improve the streetscapes within its jurisdiction, through on-theground security, cleaning and maintenance, social work, and marketing the CBD as open for business.
“Through these efforts, the CCID is helping to promote Cape Town’s Central City as a world-class destination that’s open for investment, which bolsters the CBD’s property scene.”