Cape Town office market shows resilience amid … 2017...2 Cape Town |Office Market Report Q4 2017...
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1 Cape Town Office Market Report | Q2 2017 Cape Town Office Market Report Cape Town office market shows resilience amid water crisis In association with Baker Street Properties Q4 2017
Transcript of Cape Town office market shows resilience amid … 2017...2 Cape Town |Office Market Report Q4 2017...
1 CapeTownOfficeMarketReport | Q2 2017
Cape Town Office Market ReportCapeTownofficemarketshowsresilienceamidwatercrisis
In association withBaker Street Properties
Q4 2017
2 CapeTownOfficeMarketReport | Q4 2017
Q4 highlights
ItisnotsurprisingthatCapeTownclosed2017onapositivenote.Wereportedontheresilienceofthecity’sofficemarketovermuchof2017andQ4wasnodifferent.AccordingtoSAPOA,thevacancyratedeclinedto6.9%inQ4,down0.7%fromQ42016.Itshouldbekeptinmindthattheconversionofofficebuildingstoresidentialusehascontributedtothedeclineinvacancies.Nevertheless,despitetheseconversions,officestockincreasedby4.0%in2017,anindicationthatthedeclineinvacanciescannotbeattributedsolelytoassetsbeingconvertedtoalternativeuses.
ThemostnotabledeclineinvacancieswasinGradePaccommodation,down4.4%fromQ42016.BearinginmindthattherehasbeenasignificantadditionofGradePstock,thedeclinehighlightsthemagnitudeofthemarket’sgravitationtowardhigh-endaccommodationinCapeTown.Thistrendisexpectedtocontinuein2018.
Vacancydataalsosuggestsanoverallriseindemand.AlongwithGradePbuildings,theGradeAmarketrecordeda1.0%declineinvacanciesto4.0%.GradeAstockaccountsforover50%ofthecity’sofficestock,whichmakesthisasignificantdrivingfactorintheoveralldecline.AmoremarginaldeclinewasrecordedintheGradeBvacancyrate,whichreducedby0.3%.Nevertheless,thisremainsapositiveindicationofimprovementsacrossthesub-sectors.
Cape Town office vacancy rate
Source: SAPOAGrade P Grade A Grade B Grade C Total
0.02.04.06.08.0
10.012.014.016.018.020.0
12.1%
7.7%5.0%
4.0%
10.0% 9.7%
13.7%
18.5%
7.6% 6.9%
Vaca
ncy
rate
(%)
Q4 2016Q4 2017
Stock
2,609,022m²Vacancy rate
6.9%Development pipeline
35,000m²
3 CapeTownOfficeMarketReport | Q4 2017
Development pipeline
Market outlook
CautiousdeveloperactivityhasservedtheCapeTownmarketwellduringthetougheconomicenvironmentofthepasttwoyears.However,vacanciesgenerallymayhavereachedalowfromwhichwemaynowseeslightincreasesgoingforwardasnewdevelopmentscomeonstream.Toputitintoperspective,the4.0%y/yincreaseinstocktranslatestojustover104,000m².Thiscomparestoanetabsorptionestimatedatjustover107,000m²forthepastyear.Withtheimpactofoffice-to-residentialconversionslikelytolessenin2018,thegradualadditionofaccommodationremainstheprudentapproach.
Thechangeinthepoliticalclimatehasimprovedeconomicsentimentsatthebeginningof2018,asCyrilRamaphosatookoverasthepresidentoftheANCinDecember2017.Encouragingly,ithasnotjustbeensentimentsthathavecontributedtoarecoveryinthelocalcurrency:wehavemovedawayfromtherecessionthatloomedovertheeconomyinearly2017,withthelatestGDPgrowthrateabout2.0%inQ32017.TheimprovementinGDPispromisingofalaggedincreaseinemploymentinmonthstocome.
ItisunfortunatethatthewatercrisiscoulddampenCapeTown’sappealtonewentrantsintothemarket.Muchdependsonthemunicipality’sabilitytoaddressthisinfrastructureproblemswiftly,whichcouldbeadeterrentforinvestorsandoccupiersalike.
Development Approximate Size (m²)
Node / sub-market
Opening date % Speculative % Non-specu-lative
Speculative, m²
Non-specula-tive, m²
156Roggebaai 16,000 Cape Town
CBD Q12018 100% 0% 9,500 6,500
SableSquare 16,000 CenturyCity Q22018 50% 50% 8,000 8,000
117onStrand 5,500 Cape Town CBD Q12019 100% 0% 5,500 2,500
Abland 12,000 Cape Town CBD Q22020 100% 0% 12,000 0
4 CapeTownOfficeMarketReport | Q2 2017
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