According to senior leasing and investment consultant, Ian Grant, of the Eris Property Group, the total vacancy level in the Cape Town CBD is 9.3%. This compares very favourably against the overall vacancy figures for Century City (at 10.2%) or Claremont (14.7%). Bellville has a vacancy of 6.25% because of corporate giants Sanlam and Metropolitan, and likewise Pinelands has a modest 6.8% vacancy rate because of the enduring presence of Old Mutual.
Grant says, “It’s important to view the 9.3% overall vacancy level of the Cape Town CBD in light of the fact that the total office area across all grades in the Central City is three times higher than that of Century City and Pinelands.”
The V&A Waterfront sits at a not-surprising low of 1.4% because of its unique location. However, its office node is still relatively small in comparison to the other nodes.
Grant points out that a more accurate reflection of the individual grades reveals a number of interesting facts about office rentals in the Cape Town Central City.
A-grade property in the Central City was faring well against other nodes. Says Grant: “One must remember that there is materially more A-grade office space in the CBD than in most other areas of Cape Town. Despite this, vacancies across premium space in the CBD are at a very low 1.9%, and remained steady throughout the course of 2010. Compare this to Century City, which had an 18.9% vacancy in premium grade space.”
Grant notes that vacancies in B grade space in the Cape Town Central City are high by comparison to other nodes, at an 11.8% vacancy rate. This represents an opportunity for businesses seeking to be based in the CBD. Bellville, the second biggest node for B grade space, has a vacancy of 8.7%.
Cape Town Partnership CEO Andrew Boraine points out that the phasing in of the IRT public transport network – the MyCiTi bus service between Table View and the CBD is set to start running on Monday 09 May 2011 – will alleviate the necessity to access the Central City by car and will encourage greater footfall into the city. Grant supports this view:
“The CBD is the most easily reached destination for most of the work force from all corners of the Cape Metropole, and this is important for rapidly growing sectors such as the outsourcing/call centre sector. For example, Growthpoint’s 11 Adderley Street is a shining example to all of us in the office sector: they have successfully refurbished an older city property to provide big footplates and top quality space designed for call centre use and subsequently secured key larger tenants such as Teleperformance, providing long-term jobs and investment in the process.”
Other B-grade space options include:
- student housing
- cost-effective residential either for sale or lease (as seen in the Johannesburg CBD).
- sectionalising, upgrading and selling of older office complexes, providing a workable ownership option to the high number of smaller companies, such as those in the creative industries and IT (significant interest in this regard is already occurring in the area known as the Fringe: Cape Town’s Innovation Hub, currently being explored by numerous public and private partners in the old East City area)
The Central City is also home to a growing number of educational operations. Notes Grant: “A number of deals have recently been done with either public or private bodies requiring space for education-type facilities. Even in a recession, these types of facilities continue to be required and the CBD once again meets the needs of being a location of choice; easily accessible for both staff and students.
Says Central City Improvement District COO Tasso Evangelinos: “We are seeing a rise in the number of educational facilities basing themselves in the Central City and I believe this trend will continue, especially given the current availability of B-grade space in the CBD, offering excellent value. The Central City is an ideal student hub because it’s safe, central, pedestrian-friendly and offers easy access to cultural attractions, restaurants, public spaces, shopping, services and amenities.”
While vacancies continue to be a challenge (as elsewhere in South Africa and indeed the world), developers and investors have nonetheless continued to buy major blocks of CBD property.
Says Grant: “This underlines a sustained confidence in the Central City that no one else can demonstrate. These acquisitions have largely been triggered by a tenant moving or a lease becoming shorter, but this type of challenge invariably is seen as an opportunity by someone else who either has a requirement in hand or a vision for the future which they are prepared to back with cash.”
Rob Kane, Chairperson of the Central City Improvement District, says, “The City Centre’s property outlook remains positive due to constant improvements to the urban landscape and the ongoing investment and development interest in the city that boosts its reputation as an appealing residential, retail and business hub.”