CBD economy shows resilience, report says
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Despite the construction sector being under severe strain, residential property developments dominated central Cape Town last year, according to the State of Cape Town Central City report.
The report also showed that while the office and retail sectors struggled with reduced business activity, the residential sector rebounded swiftly once lockdown regulations began to ease, with buyers taking advantage of low interest rates and adoption of remote working.
The economy of the Cape Town CBD remained stable despite Covid-19, with the official nominal value of all property set at R43.8 billion by the City of Cape Town.
Cape Town Central City Improvement District (CCID) board chairperson, Rob Kane, said the data showed steady confidence in the development potential of the CBD.
“The Cape Town CBD once again proved its resilience in a very tough year. While some businesses have closed, many others have survived the first Covid year and it is very encouraging to note that investor and property development interest in the city centre remains steady,” said Kane.
Of the 31 new developments recently completed or currently under way, planned or proposed, five were completed last year, conservatively estimated at R972 million.
Fifteen developments worth about R2.9bn were under construction in 2020 and nine with a conservative estimated value of R2bn were in the planning stage, while two proposed development were worth about R860m.
The report also noted that key trends that emerged in 2020 were on mixed-use developments featuring micro units, aparthotels (a mix of residential apartments and hotel rooms) and membership options.
Of the five completed developments, one was residential and two were hotels/aparthotels.
However, Kane also noted a significant increase in available rental stock in the last year as repeated lockdowns and subsequent travel restrictions impacted the tourism and eventing industry.
“This prompted numerous units, which were previously available as short-term lets such as Airbnb, being added to the long-term rental pool,” he said.
Another notable development was the conversion of the iconic feature of the Cape Town skyline, the commercial building One Thibault, into a mixed-use office and residential development.
Trend economist Bronwyn Williams said some trends in the real estate sector were likely to remain and amplify in the following years.
Williams said blue chip companies were also abandoning massive single-use office spaces in favour of “flexible” co-working spaces.
As e-commerce was also becoming a norm, retailers were re-evaluating the costs and benefits of having physical versus digital landlords, said Williams.
"The result is a city landscape in flux," she added.
Williams said economic and environmental concerns had accelerated pressure for local and national governments to focus on sustainability in terms of climate change and spatial and financial inequality.
While the more than 2 840 entities doing business in the CBD remained resilient, the economic knocks brought on by the pandemic led to the closure of hundreds of retail outlets. However, new establishments opened, the report said.
With 1 038 707 m² of total commercial (office space) available in the Cape Town CBD, the office vacancy rate as at the fourth quarter of 2020 was 14.6 %.
“The total vacancy rate of retail space (31 077 m²) in the CBD in 2020 amounted to 11.5 % of the total space available. In 2019, the total vacancy rate of retail space was 9.4 %,” noted the report.
It added that despite a slump in tourism in 2020, two new hotels opened and attracted domestic travellers.
By end of last year there were 16 co-working spaces in downtown Cape Town – just one less than by end 2019.
A global research commissioned by software company Citrix, which included 500 South African respondents, showed that office workers reported improvement in their personal lives and careers as a result of working from home.