The economy of the Cape Town central business district (CBD) remained stable in 2020, despite Covid-19, with the official nominal value of all property set at R43.8-billion by the City of Cape Town, and with 31 new developments worth more than R6.9-billion in the pipeline.
This is the key finding of the special Covid edition of the annual ‘State of Cape Town Central City Report 2020 – A year in review’, published by the Cape Town Central City Improvement District (CCID).
Data in the ninth edition of the annual report (which reflects on the economic climate in the Cape Town central city across the previous year) shows steady confidence in the development potential of the CBD, says CCID board chairperson Rob Kane.
“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,” says Kane.
Of the 31 new developments (recently completed, currently underway, planned or proposed in the CBD), five were completed in 2020 (conservatively estimated value R972-million), 15 were under construction in 2020 (conservatively estimated value R2.9-billion), nine were in the planning phase (conservatively estimated value R2-billion) and two were proposed (conservatively estimated value R860-million).
Key developments include Abland’s P-grade skyscraper 35 Lower Long (valued at R500-million), Ryan Joffe Properties’ The Rockefeller at Harbour Place (valued at R500-million), and WBHO’s Hotel Sky (valued at R400-million).
Since the report was published, the conversion of the commercial building One Thibault, which has been a feature of the Cape Town skyline for decades, into a mixed-use office and residential development (valued at R500-million) has confirmed the trend of repurposing commercial buildings.
The report also found that with 1 038 707 m² total commercial (office space) available in the Cape Town CBD, the office vacancy rate in the fourth quarter of 2020 stood at 14.6%.
The economic effects of Covid-19 led to the closure of hundreds of retail outlets, but this was only slightly outpaced by the opening of new establishments, indicating a willingness of entrepreneurs to remain agile in an uncertain Covid economy, says the CCID report.
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 for retail space was 9.4%.
The total volume in square metres of retail space available in the central city at the end of 2020 amounted to 270 176 m², marginally less than the 274 605 m² recorded at the end of 2019.
The total space occupied at the end of 2020 declined by 9 597 m², from 248 696 m² recorded at the end of 2019, to 239 099 m² at the end of 2020.
This was a decrease of 3.9%.
In spite of Covid crushing the tourism sector and the knock-on effect on the central city’s visitor and eventing economies, most central city hotels pulled out all the stops in 2020 to get domestic guests through their doors.
Two hotels were among the developments in 2020, namely the R400-million Hotel Sky development and the Old Bank Hotel.
Two aparthotels, WINK Foreshore (valued at R75-million) and Urban Oasis in the East City, were completed in 2020.
The most significant indicator of investor confidence in the Cape Town Central City was the growth in property value from R30.6-billion in 2016/17 to R43.8-billion in 2019/19.
Kane notes that the increase in gross valuation for the Cape Town CBD remains heartening and speaks to continued investor confidence and development potential.
The commercial property market remains resilient in 2021, with the continued conversion of office buildings into mixed-use developments or residential developments.
“This indicates a flexibility in the sector,” says Kane.
Of the 15 developments under construction in the CBD in 2020, at least nine were residential developments valued at R2.07-billion.
The median price of apartments sold in the central city in 2020 was R1.65-million, which is less than the R1.8-million median price reached in 2019.
The most sales were recorded in the R20 000/m2 to R29 999/m² price band.
“The distribution of sales across the various price bands shifted from the most being recorded in the R30 000/m2 to R39 999/m² category in both 2018 and 2019, to the lower band in 2020,” says Kane.
“This can be attributed to the price correction in the national residential housing market in recent years which has brought house prices in line with prevailing economic realities.”
In 2020, the median price of R1.65-million for sectional title units represents an 8.3% decline relative to the median price achieved in 2019, which was R1.8-million.
In 2020, 130 units were sold compared with 174 units the previous year.
In terms of rentals, at the end of 2020 (end-January 2021), a total of 475 units were listed on Property24.com as available for rent in the Cape Town central city. This compares to 180 units listed end-2019.
“There was a significant increase in available rental stock in 2020 as repeated lockdowns and subsequent travel restrictions impacted the tourism and eventing industry,” notes Kane.
“This prompted numerous units, which were previously available as short-term lets such as AirBnB, to be added to the long-term rental pool.”