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News article

Commercial Properties

Published: 11 April 2017

Growth and Upgrading of Commercial Properties in Cape Town Continue in 2016

Recently published industry reports for 2016 documenting the current state and outlook for commercial properties in Cape Town showed that over 17800sqm of office space was rented within the first five months of the year. This is good news for property investment companies as it shows that the demand for office space is steady. The vacancy rate of just over 7% experienced in the last part of 2015 remains unchanged. Vacancies increased in Grade A and B commercial properties, though a decline in the Grade P vacancies has been noted.

Retail commercial properties are still faring exceptionally well, outperforming industrial and office property rentals. This can be attributed to higher retail sales in the given period, but the effects of inflation and increases in across-the-board interest rates may only become apparent later on during the year; as such, investors remain wary.

The industrial property sector in the city is growing in line with countrywide demand for more warehouses. This trend is attributed to the declining manufacturing sector, which is a result of high labour costs, government regulation, inability to compete with cheaper imported products from countries such as China and the struggling primary sector. With a higher demand for imported consumer products, an increasing amount warehouse and distribution space is needed at locations close to cargo terminals or ports. Cape Town offers both, making it a prime spot for industrial development.

With the rapid increase in imports came the need to upgrade road, rail and harbour infrastructure to ensure proper distribution. It also entails upgrades to warehouses, logistics facilities and storage space, evident in the subsequent upgrading of over 11 million square meters over the last ten years. The warehouse and distribution property sector attributes just below 10% of the Gross Domestic Product at present.

Redefine, together with property developer VDMV, also recently commenced with Brackengate Phase 2. The development will include much-needed warehouses, logistics and DIY large-scale retail space. With the very favourable location of the industrial park, it is expected that the commercial properties available will be in high demand amongst importers.

The growth of online retail may mean less shopping space needed in future, but at present businesses still expand their market reach. However, with online sales also come the inevitable need for storage and warehouse space for consumer products that must be distributed upon online ordering. As such, the development of more industrial parks can be expected.

Cape Town’s central city district has also been upgraded considerably over the last four years. The commercial properties especially have been revamped in combination with various facilities for entertainment and relaxation.

With the city’s residents more environmentally conscious than many other city residents in the country, Redefine’s greening over of The Towers is especially well appreciated. It also includes the application of a flushed glazed system on the building’s facades to reduce the need for cooling.

Additional steps entail the installation of energy-efficient lighting in combination with time switches and the company is busy with several other building upgrades in the city. Cape Town’s makeover will definitely enhance its tourism attractiveness, while it will also attract more businesses to invest in or rent commercial properties in and around the city.

One of the main concerns is Britain’s recent bold step to leave the European Union. The step caused financial panic throughout the world and with our economy being connected to the UK’s, many companies were affected, especially with the cost of importation as the result of a weakening South African rand. Interest rates increased, which has made it more difficult to finance commercial properties and for consumers to obtain more credit. Many of the property investors waited for more economic stability, but the commercial property value has not really been affected and the economy should get back on track quickly.

Redefine has an extensive commercial property portfolio in Cape Town ranging from Golf Air and CTX Business and Industrial Parks to shopping centres such as Kenilworth and Blue Route Mall.