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Cape Town has lowest office vacancy rate

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Cape Town’s office sector vacancy rates continue to remain the lowest in the country at almost 8%.

By Bonny Fourie

Cape Town’s office sector vacancy
rates continue to remain the lowest
in the country at almost 8%.  

This is according to the South African Property Owner Association (SAPOA) and the most recent JLL Cape Town Office Market Report, which reflects the sector’s performance in the first quarter of this year.

The vacancy rate in Cape Town is 7.6%. The rates in the Nelson Mandela Bay Municipality are 9.9% and Tshwane are 9.8%. Both the eThekwini Municipality and City of Johannesburg have vacancy rates of 12.3%.

SAPOA statistics show the vacancy rates in Cape Town nodes are:

Bellville, 5.1%

CBD, 11.5%

Century City, 7.6%

Claremont, 6.9%

Pinelands, 2.1%

Rondebosch/Newlands, 4.7%

Waterfront 0.8%.

“A significant factor driving the excess supply currently prevalent in the market is the amount of space left behind by large corporates consolidating multiple real estate tenancies into single, newly-built, large-scale campuses.

“This backfill risk has already contributed to increased vacancy rates in certain nodes with the potential for more as several large development projects come on line in the short term,” SAPOA says in its Q2 Office Vacancy Report.

In addition to Cape Town’s office sector vacancy rates outperforming those of other cities, the JLL report also states the city’s recent positive global investment ranking is unlikely to be affected by the country’s current political instability.

Although the recent credit downgrade will negatively affect the country’s economic performance and the political performance has been “discouraging”, the report says it is important to note the economic and private sector fundamentals that drive much of the business activity in the country have shown improvement.

“This is where the stability of the Cape Town office market takes its lead. The city has continued to attract global corporates and the market has seen a number of international companies either looking to expand their presence or open offices for the first time.

“Demand remains robust and it has allowed for continued growth in the city’s rental rates.”

The report says rental rates in Cape Town have remained “stable”, with top-end quality space achieving R230/m² to 240/m² in new developments in the V&A Waterfront and southern suburbs. In the CBD, premier grade space is achieving R185/m² and A-grade R146/m².

Rode & Associates’ report on the state of the property market in the first quarter of 2017 says office rentals in Cape Town decentralised are showing the strongest growth, benefiting from very low vacancy rates in the city’s top suburban office nodes. In the first quarter, nominal market rentals in Cape Town decentralised nodes showed growth of 7%, slightly in excess of the expected growth in building-cost inflation of 6%.

“Cape Town decentralised was followed by Durban and Pretoria decentralised, where rentals were up by 6% and 2% respectively. The weakest performance came from Joburg decentralised, where rentals, on average, remained roughly at previous year levels.”

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