Demand for Cape Town office space brings about dramatic reduction in vacancies

As office vacancies reduce and rentals correct, Capetonians can expect to see major changes as the development phase of the commercial property market kicks in.

The latest SAPOA Office Vacancy Survey for Cape Town confirms the continued demand for office space with vacancies throughout the Peninsula tumbling.

Dave Russell, director of Baker Street Properties, comments,” Claremont has seen “A” Grade vacancies plummet from 32,3% in March 2004 to 5,3% today. Over the same period “A”Grade vacancies in the Rondebosch / Newlands node reduced from 9,1% to 2,4% today. In September 2003 the vacancy in this area was 19%.

“The Cape Town CBD continues to enjoy the downward swing with a reduction in “A” Grade from 10,6% in early 2004 to 5,1% today. Even “B” Grade vacancies have reduced substantially from 15,2% to 10,6%.

Russell adds,” Landlords in Century City have enjoyed seeing “A” Grade vacancies reduce from 13% to only 1,4% today. While there are a number of new developments under construction it will be some 12 months before supply is available to meet the demand.

“Against this background of reducing vacancies we await the imminent and inevitable increase in rentals. In fact this correction has already commenced in most office nodes where increases in excess of 20% have been achieved this year.”

 “So where to from here?  Commercially zoned land throughout the Cape is now at a premium with only a few opportunities available. The recent sale of 18 office sites totalling 35,000m² in Century City highlights the demand from owner occupiers and developers when the entire scheme was sold out within 24 hours of its launch last month. This demand has also been experienced in the industrial sector where the value of land has more than doubled in the past 12 months.” says Russell.

He concludes, ”Ownership is the buzzword today with more and more companies looking to buy. As a result major sectional title office developments are planned for Century City, Observatory and the CBD. New decentralised “A” Grade developments presently coming out of the ground can be purchased for between R9,000/m² to R10,000/m² with undercover parking bays priced between R50,000 and R60,000 each in decentralised areas while a new scheme being planned for the CBD is asking R13,000/m² and R110,000 per basement parking bay. These figures can be compared to quality residential apartments where in excess of R20,000/m² is regularly achieved

“Speculative office developments are just around the corner with developers watching the rental market closely. Rentals of around R120/m² gross have to be achieved to make most schemes feasible. However, as vacancies reduce and rentals increase developers are becoming more and more bullish. The development stage of the property cycle is about to begin. “

Source: eProp - www.eprop.co.za

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