Increased demand for commercial and residential CBD property in 2023
The Cape Town CBD turned a corner in 2023, rebounding from the persistent economic pressure with a boom in property investments.
Demand for commercial and residential space in the City Centre was matched by a surge of new property investments totalling an estimated R7.285 billion. This was more than double the value of property investment in 2022, according to the latest findings of the State of Cape Town Central City Report 2023 – A Year in Review (SCCR), the annual publication on the Cape Town CBD economy published by the Cape Town Central City Improvement District (CCID).
Rob Kane, CCID chairperson and CEO of Boxwood Property Fund, says: “This is an extraordinary investment for an area of only 1.6 km² in a country with a subdued economy. It will significantly increase the economic growth and dynamic mix of the Cape Town CBD and enhance its reputation as South Africa’s most successful inner city.”
The prestigious report details 30 residential, commercial, mixed-use, retail, aparthotel and parastatal developments and redevelopments that were completed, under construction, in the planning phase or proposed in 2023.
In the mix were stand-out developments that have changed, or are set to change, the Cape Town Central City skyline. These include the R600 m mixed-use skyscraper, The Rubik, designed to resemble the Rubik’s Cube; Neighbourgood 84 Harrington (R180 m), the world’s tallest aparthotel to be constructed from hempcrete blocks; and The Barracks, a R150 m Heritage development in vibrant Bree St.
Commercial developments
Kane says: “There were five new commercial-only developments in 2023, while seven mixed-use developments also include offices. This increased offering coupled with a decline in office vacancy rates, reflects a renewed interest in office space driven by the economic recovery of the Central City and a trend towards employees returning to the workplace.
“It also shows how resourceful and innovative Cape Town commercial landlords have been in creating pleasing work environments for tenants in a bid to entice workers back to the office.”
Data in the latest SCCR shows the improvement in the office vacancy rate was evident throughout the metropole, with the city of Cape Town recording the lowest office vacancy rate of 7.5 % among the major municipalities. This is the lowest vacancy rate recorded by the city since 2019, despite an increase in the real inflation-adjusted asking rate of commercial rentals across all office grades in 2023.
While the CBD has one of the highest office vacancy rates in the metropole, vacancy rates in all office grades in town, except B-grade, improved beyond pre-pandemic levels.
Residential boom
Persistent demand for additional residential units in the Central City will be somewhat alleviated by 12 new residential property investments made in 2023, and additional residential units in seven mixed-use developments and three aparthotels.
Nine developments were completed last year, valued at R1.347 bn. Of these, three were residential builds valued at R280 m, with two more under construction. The completed builds include two residential complexes in the inner city in Loop Street, namely the R70 m apartment block The Carrington and The Tokyo (R150 m). The other development, Vida d’Chette (R60 m), provides flexible leasing on the Foreshore
Six residential buildings are in the planning phase with a combined value of R915 m, conservatively estimated. Additionally, two mixed-use buildings were finalised, with another under construction and four in the planning or proposal phases. One of the most exciting planned mixed-use developments is Mama Shelter Africa, which will see the international hotel brand reimagine the old City Park building and redevelop it into branded residences, and office and retail space set to reignite investment in the hospitality and retail sector.
Residential sales
The report reflects an increase in the total number of residential units in the CBD to an all-time high of 7 188 apartments in 2023, up from 6 827 in 2022 and 5 791 in 2021. The average purchase price of sectional title properties increased by 7.2 % to R1.58 m compared to R1.47 m in 2022.
“The CCID partners with the City of Cape Town and the South African Police Service (SAPS) to safeguard the Central City and ensure its status as the most economically sound city centre in the country. Cape Town’s top good governance ranking, coupled with the CBD’s booming property sector, make the Mother City an exceptionally attractive investment destination,” concludes Kane.