cape town office market shows resilience amid … 2017...2 cape town |office market report q4 2017...
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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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