CAPE TOWN COMMERCIAL MARKET UPDATE 2017

CITY OF CAPE TOWN UPDATE

Global  confidence  in  the  City  of  Cape  Town  has  reflected  in  two  global  rankings,  ge;ng  the  city  off  to  a  posi=ve  start  in  2017.  Cape  Town  featured  in  the  Financial  Mail’s  FDI  Intelligence  report,  ranking  21  in  the  world  for  its  FDI  strategy,  Invest  Cape  Town.  Cape  Town  also  featured  37th  in  the  world  as  a  city  where  property  investors  should  invest,  according  to  a  report  produced  by  Wealth  X,  surveying  investment  ac=vity  by  global  high  net  worth  individuals.  More  than  a  holiday  des=na=on,  Cape  Town’s  commitment  to  inves=ng  in  technology,  improved  transport  and  world-­‐class  infrastructure  has  allowed  it  to  aOract  highly  skilled  individuals,  as  well  as  companies  from  various  sectors  from  within  and  outside  of  the  country.    

All  this  is  evident  in  the  city’s  office  market  performance  in  2016.  Over  the  past  year,  Cape  Town  has  seen  growing  interest  from  global  occupiers  including  DSG  and  the  Norwegian  Investment  Fund,  while  KPMG  and  EY  renewed  their  commitment  to  the  city.  Cape  Town’s  office  vacancy  rate  sits  at  3.1%  below  the  na=onal  office  vacancy  rate.  Rental  growth  is  also  higher  at  8.0%    While  the  economy  is  not  out  of  the  woods  yet,  any  recovery  in  2017  will  only  work  to  boost  the  Cape  Town  office  market.  The  city  has  also  seen  a  diversifica=on  in  interested  occupiers.  Tradi=onally  viewed  as  the  financial  capital  of  South  Africa,  Cape  Town  is  now  aOrac=ng  many  ICT  businesses  and  is  one  of  the  largest  business  process  outsourcing  loca=ons  in  South  Africa.      

 

SUPPLY

Economic  condi=ons  did  not  dampen  the  outlook  for  property  owners  in  Cape  Town  as  confidence  in  the  city  remained  consistent  throughout  2016.  Overall,  office  stock  increased  by  2.5%  y/y  in  Q4  2016,  with  the  rise  in  stock  dominated  by  Grade  P  accommoda=on,  which  accounted  for  the  majority  of  new  comple=ons  in  the  year.  New  developments  were  dominated  by  Century  City,  responsible  for  40%  of  new  comple=ons  in  2016,  a  notable  propor=on  of  these  being  specula=ve.    Other  areas  included  the  prime  node  of  the  V&A  Waterfront  and  the  CBD,  together  working  towards  higher  rental  rates  in  Cape  Town.  New  developments  have  been  well  received  in  the  office  market  and  are  either  now  fully  let  or  enjoying  considerable  interest  from  prospec=ve  tenants.  Data  from  SAPOA  indicates  that  88,868m2  of  new  developments  were  completed  in  2016.  Although  lower  quality  accommoda=on  (Grade  B  and  C)  recorded  a  decline  of  20,400m2  in  2016,  less  than  a  quarter  of  the  addi=on  in  accommoda=on  during  the  year.  However,  the  vacancy  rate  in  the  city  had  not  seen  much  movement.      While  the  market  had  started  off  with  a  development  pipeline  of  just  over  60,000m2  in  Q1  2016,  this  has  slowed  down  to  just  31,000m2  in  Q1  2017.  The  number  of  developments  is  also  smaller,  and  the  specula=ve  por=ons  have  narrowed  in  comparison  to  last  year.  Nevertheless,  this  should  not  be  read    as  an  indica=on  of  a  decline  in  investor  confidence.  Although  vacancies  have  remained  flat,  they  are  low  enough  for  addi=onal  developments  to  be  considered.  Economic  prospects  have  improved  and  this  should  s=mulate  future  demand.      

 

DEMAND

Two  key  factors  drove  stronger  demand  in  the  Cape  Town  office  market  in  2016,  the  first  being  the  conversion  of  tradi=onal  office  buildings  to  residen=al  which  required  some  occupiers  to  relocate.  Second  is  a  growing  interest  in  the  city,  from  both  local  and  interna=onal  occupiers.  This  allowed  all  nodes  to  maintain  a  rela=vely  low  office  vacancy  rate  despite  the  notable  addi=on  of  new  buildings.    Established  office  nodes  have  seen  a  reduc=on  in  vacancies  in  the  quality  Grade  A  and  P  categories.  This  remained  the  trend  in  Q4  2016,  with  occupiers  taking  up  accommoda=on  in  the  CBD  and  Century  City.  Key  deals  included  Vodacom’s  occupa=on  of  5,500m2  and  Innova=on’s  4,000m2,  both  in  the  CBD.  Century  City  welcomed  MasterCard  and  Derivco  among  others.  As  there  are  very  few  office  developments  presently  under  construc=on  we  see  this  trend  of  declining  vacancies  con=nuing  in  the  short  term.  It  is  worth  no=ng  that,  at  this  =me,  there  is  a  shortage  of  large  space  op=ons  in  excess  of  3,000m2  in  all  of  the  nodes  surveyed.  This  con=nues  to  be  a  hurdle  for  large  occupiers  who  are  keen  on  moving  into  the  city.  

RENTAL RATES

On  average,  rental  rates  in  the  Cape  Town  office  market  saw  a  robust  8.0%  y/y  increase  during  2016,  consistent  with  tradi=onal  escala=on  rates.  The  rise  was  dominated  by  the  9.0%  y/y  increase  in  Grade  A  accommoda=on,  which  accounts  for  over  half  of  the  office  

stock  in  the  city.    Encouragingly,  the  rental  growth  in  2016  falls  well  above  the  infla=on  rate,  indica=ve  of  stable  demand  in  the  market,  and  a  more  landlord  driven  climate  than  one  might  have  an=cipated.    The  introduc=on  of  Grade  P  buildings  over  the  years  is  also  beginning  to  play  a  more  important  role  in  the  city’s  average  rental  growth  rate.  Grade  P  buildings  closed  the  year  on  an  average  rental  rate  of  R178/m2,  well  above  the  Grade  A  average  rental  rate  of  R150/m2.  While  prime  quality  accommoda=on  only  accounts  for  6.0%  of  total  office  stock  in  the  city,  it  is  important  to  note  that  stock  of  this  kind  is  on  the  rise  and  will  likely  result  in  an  overall  upward  shik  in  the  city’s  average  rental  rates.  

NEW DEVELOPMENTS

Five  new  major  property  developments  have  gone  into  the  planning  phase  and  another  seven  proposals  have  been  ini=ated  in  Cape  Town’s  CBD  since  the  beginning  of  the  year.  This  is  according  to  the  Cape  Town  Central  City  Improvement  District  (CCID),  which  es=mates  the  combined  minimum  value  of  planned  and  proposed  developments  for  the  Central  City  to  be  more  than  R4  billion.      

KMPG PLACE

KMPG  Place  is  a  24  000m²  mixed  use  development  located  on  the  prime  corner  of  Chris=aan  Barnard  Street  and  Mar=n  Hammerschlag  Way  in  Cape  Town’s  new  Culemborg  legal  and  financial  services  precinct.  The  site  is  ideally  located  adjacent  to  the  N1  /N2  motorways  offering  excellent  accessibility  from  all  parts  of  the  City.  KPMG  Place  comprises  three  residen=al  levels  above  eleven  office  levels.  There  are  also  ten  parking  levels  above  ground  and  three  below  ground  providing  a  ra=o  of  three  bays  per  100m²  of  usable  office  space.  The  ground  level  offers  a  retail  and  showroom  component  providing  an  interac=ve  streetscape.  The  office  levels  offer  virtually  any  office  suite  size  from  100m²  to  en=re  floors  where  the  floor  plate  is  1,500m².  All  offices  have  spectacular  views  of  Cape  Town  and  the  top  floor  boasts  an  entertainment  area  and  cafeteria  for  the  use  of  the  tenants.  h#p://www.fwjk.co.za/2016/11/12/kpmg-­‐place-­‐cape-­‐town/      

ZERO -2 – ONE

Zero-­‐2-­‐One  Tower  will  be  the  tallest  building  in  Cape  Town  at  42  storeys  covering  a  floor  area  of  44  000  m²  which  includes  retail  at  ground  level  and  624  apartments  providing  some  of  the  most  astounding  360  degree  views  available  in  Cape  Town.  The  building  is  topped  off  with  a  viewing  deck  available  to  the  public  which  will  generate  significant  revenues  for  the  owners  of  this  development.    Construc=on  of  this  tower  block  located  on  the  corner  of  Strand  and  Adderley  Streets  is  scheduled  to  commence  in  August  2017  and  will  be  complete  in  March  2020.  The  architecture  on  this  iconic  building  is  designed  by  FWJK  Architecture  to  firstly  respond  to  the  brief,  maximizing  the  efficiency  of  the  floor-­‐plates  and  the  statement  of  the  building  in  general  considering  its  loca=on  at  the  gateway  to  the  city  as  well  as  reinforcing  its  stature  in  this  prime  loca=on.    

16 ON BREE

16onBree  is  a  35  story  retail  and  residen=al  development  planned  for  the  site  bounded  by  Bree,  Prestwich  and  Mechau  Streets  with  a  sec=onal  =tle  area  of  approximately  22  000  m².  Pam  Golding  Proper=es  reached  a  record  sales  of  80%  of  the  350  apartments  in  a  two  week  period  since  the  marke=ng  launch.  Demoli=on  and  construc=on  work  is  expected  to  commence  in  July  2017  and  will  be  complete  by  December  2019.    16  on  Bree  will  be  the  tallest  residen=al  building  in  Cape  Town  and  is  located  right  across  Bree  Street  from  FWJK’s  Touchstone  House  office  and  retail  development  completed  in  December  2015    h#p://www.16onbree.co.za    

hOps://youtu.be/eEmoWwCDgzc    

REALTOR OF EXCELLENCE WHO ARE WE?

Realtor of Excellence is South Africa’s first Virtual Cloud Based Real Estate office with an enviable track record and reputation in the property industry over the last 25 years. “We are taking our cue from the paradigm shift in almost all industries and have harnessed the power of both the internet and both social and digital media to do business. The way in which we will be doing this will be a first in the South African property industry and it will set us apart from the traditional way of selling property, while at the same time making our agents more productive, enabling a much better service to our clients.” – CEO, Toni Enderli Providing our buyers and sellers the best service available and improving the delivery of that service through advanced technological systems.

OUR CORE COMPETENCIES

With so many facets in the real estate industry, we focus our attention on transactions in the following: •  ResidenAal  Property  •  Commercial  Property  •  New  Developments  •  Rentals  (residenAal  &  commercial)  •  Agricultural  Property  •  Leisure  Property    •  Off-­‐shore  (internaAonal)              property  investment    •  Property  Admin  

OUR REAL SERVICES

At the moment, we have created the following Real Services to support you:

•  Bond  •  Bridging  •  Forex  

•  Life  •  Short  term  •  Medical  •  Business  

•  Our  photography  soluAon  that  ensures  quality.  Professional  images  do  jusAce  to  the  property  on  sale  and  offers  professional  consistency  across  the  group  

•  Full  service  removals  for  clients  at  compeAAve  rates  •  Community  Box  

INTERNATIONAL REACH

Our extensive international associations not only mean that we can offer great offshore investment opportunities to all our clients, but we also ensure that our overseas markets are exposed to the marketing of our properties, attracting enviable exchange rates and investment into the property market.

We have affiliate offices in United Kingdom, Switzerland, Spain, Germany, Austria, Australia, Africa and the United States of America.

MARKETING CHANNELS

Like the web listings, we use innovative techniques throughout our marketing as well as a unique combination of the channels below to offer a tailor-made marketing campaign for your property. You need the best for your house, not some industry average! We include the following:

•  Web  –  Web  Campaigns  etc  •  Print  media  –  inclusion  in  various  print  media  

where  applicable  •  Direct  media  –  newsle#ers,  direct  mailing  

campaigns  •  Social  Media  –  Facebook,  Twi#er,  LinkedIn  and  

others  where  applicable  •  Mobile  Media  –  mobile  search  engines,  

property  apps    •  Network  markeAng  –  our  extensive  databases  

and  profiled  buyers  •  ExperienAal  –  Show  houses,  virtual  tours  where  

required  

VIEW  TONI  ENDERLI  DIGITAL  PROFILE  hOp://toni.co.za/property-­‐expert/