Although the construction sector is under great pressure, residential real estate developments dominated central Cape Town last year, according to the Cape Town Central City State report.
The report also showed that while the office and retail sectors struggled with reduced business activity, the residential sector quickly rebounded once foreclosure regulations began to ease, with buyers taking advantage of low interest rates and the adoption of remote working.
The economy of Cape Town’s CBD has remained stable despite Covid-19, with the official face value of all assets set at R43.8 billion by the city of Cape Town.
Cape Town Central City Improvement District (CCID) Board Chairman Rob Kane said the data showed continued confidence in the development potential of CBD.
“Cape Town’s CBD has once again proven its resilience during a very difficult year. While some businesses have closed, many more have survived the first year of Covid and it is very encouraging to note that investor interest and real estate development in the city center remains stable, ”Kane said.
Of the 31 new developments recently completed or currently underway, planned or proposed, five were completed last year, conservatively estimated at 972 million rand.
Fifteen developments worth around R2.9 billion were under construction in 2020 and nine with a conservatively estimated value of R2 billion were in the planning stage, while two development projects were worth around R860 million.
The report also noted that the main trends that emerged in 2020 were mixed-use developments comprising micro-units, apart-hotels (a mix of residential apartments and hotel rooms) and membership options. .
Of the five developments completed, one was residential and two were hotel / aparthotel.
However, Kane also noted a significant increase in rental stock available over the past year as repeated closures and subsequent travel restrictions impacted the tourism and events industry.
“This prompted many units, which were previously available as short-term rentals such as Airbnb, to be added to the long-term rental pool,” he said.
Another notable development has been the conversion of the iconic element of the Cape Town skyline, the One Thibault Commercial Building, into a mixed-use office and housing development.
Trends economist Bronwyn Williams said some trends in the real estate industry are likely to continue and amplify over the following years.
Williams said leading companies are also moving away from huge single-use office spaces in favor of “flexible” co-working spaces.
As e-commerce also became a norm, retailers re-evaluated the costs and benefits of having physical owners versus digital owners, Williams said.
“The result is a changing urban landscape,” she added.
Williams said economic and environmental concerns have 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 have remained resilient, the economic shocks brought on by the pandemic have led to the closure of hundreds of outlets. However, new establishments have opened, according to the report.
With 1,038,707 m² of total retail space (offices) available in Cape Town’s CBD, the office vacancy rate in the fourth quarter of 2020 was 14.6%.
“The total vacancy rate for retail space (31,077 m²) in the CBD in 2020 was 11.5% of the total available area. In 2019, the total vacancy rate for retail space was 9.4%, ”the report notes.
He added that despite a drop in tourism in 2020, two new hotels have opened and attracted domestic travelers.
At the end of last year, there were 16 coworking spaces in downtown Cape Town, one less than at the end of 2019.
A global study commissioned by software company Citrix, which included 500 South African respondents, showed office workers reported improvement in their personal lives and careers through working from home.