From retail and residential to commercial, City Views takes a look at what’s on the market.
Residential – the real downtown lifestyle
A number of traditional CBDs in South Africa are aspiring to be the hip and happening downtowns that we see in the movies, but the Cape Town Central City is the only one getting this right, with a healthy spread of residential now dotted across its entire footprint.
The numbers speak for themselves. Just 10 years ago, it was estimated that only some 750 people were living in the Central City. According to the latest census, this figure has now risen to well over 5 000 living in the approximately 3 500 sectional title units available.
And while for a couple of years (since the property bubble burst), stock levels have been quite high, estate agents are now experiencing a significant reduction. According to Basil Moraitis of Pam Golding Properties, the shift is due to two key factors: “Greater confidence in the market and correctly priced stock which is selling well.”
“The market has definitely begun to change,” says Richard Boxford of LIFE Residential. “During 2005/6 approximately 70% of our buyers were first-time ‘utility’ buyers – young professionals. Through the downturn (over the past five years or so), approximately 80% of our sales have been pure (and mostly South African) investors, buying to rent out. Since the beginning of 2013, we’ve seen the re-emergence of first-time buyers who now account for an increased number of our CBD sales. Once again, these buyers tend to be young professionals in their 20s and 30s working in town. The majority of tenants on our rental portfolio are the same.”
Convenience and security are top of the list for both buyers and tenants, says Mariël Burger of Pam Golding Properties, who notes that his buyers range from “parents buying for their children to live in (students or those just starting to work), professionals in the 30 to 40 age group, and the over-45ers from out of town (for example from Hermanus, Swellendam, Gauteng and overseas) looking for a lock-up-and-go city pad.”
There are currently just over 20 apartment complexes in the Central City. Prices can start from as low as around R350 000 (in a block such as Senator Park – n w undergoing a huge renovation following its dramatic cleanup and turnaround from being a building of rather dubious repute) to around R650 000 for a bachelor apartment (in blocks such as St Martini Gardens, Four Seasons and The Square.) The average entry point for a one bedroom is around R750 000 and a two bedroom around R1 200 000.
“The most active price bracket currently,” says Mariel: “is in the R1m to R2.5m range. But what we could really do with more of in the Central City are two-bedroom apartments (around R80m2 in size) for around R1.5m.”
Of course, if money is no object, you could also buy a 619m2 penthouse in the CBD for a few rands over R15m. Or an 800m2 penthouse across two floors for R30m. But for most of us, for now, that’s just New York dreaming. It does, however, speak to where the value of property in the CBD is heading as a Central City lifestyle becomes a true 24/7 option.
Download a PDF of Cape Town residential rental rates for August 2013 here. [http://www.capetowncid.co.za/userdocs/file/Residential%20rentals%20in%20the%20CBD.pdf]
Retail and the three Ls
From the roundup of property that City Views undertook, it was obvious that retail was, as Stephen Wormald of Baker Street Properties says, “the most subjective to place a square-metre value on.” And it seems, most of the time, it still comes down to location, location, location.
According to Stephen, retail rentals in the Central City can range from R90/m2 to R350/m2, depending on the amount of space required and its location.
“The demand for space with quality shop frontage in prime locations increases rental regardless of a building’s age or the layout of its space. For example, the demand on Long Street has pushed up the prices even when a property is not considered to be fantastic, but is very well-located for a particular usage.”
Andrew Kendall of the Eris Property Group agrees: “Retail in St George’s Mall is always taken up quickly. A corner property with good exposure could go for R250-R350/m2, but two blocks’ further away it could be half that.”
The key to retail in the Central City is understanding the market you are servicing. “The Golden Acre is also very successful. It’s not high-end retail but has few vacancies and caters perfectly for its market as a high-transit mall linking to various transport options.”
The length and breadth of Bree Street is also fast becoming a retail destination for the design-related market, particular between Buitensingel and Strand Street. Says Andrew: “A number of retailers are now even starting to filter across from the De Waterkant area onto Bree.”
It’s lower end, towards the harbour, will now also have other retailers join the queue as buildings such as Portside and 22 Bree Street open their doors and see officer workers swell across 57 000m2 of new office space. “These new developments have caused a demand for food and convenience-related retailers to increase dramatically at this end of Bree.”
But even just one great, new concept can see a previous humdrum spot or building revitalized. It is said that when the owners of the now very popular Alexander Bar & Café in Strand Street – with its old rotary telephones on tables and theatre upstairs – first approached possible landlords with their concept they were met with scepticism. Today, the venue sets this previously sleepy corner abuzz from early lunches till the early morning.
The same has happened to the Foreshore’s Pier Place with the opening of Burger King, on the ground floor of the new commercial premises of Grand Parade Investments. Says Andrew: “This type of retail is probably achieving rates of R250 to R300/m2, but it is also now set to stimulate an area that was quite stagnant and quiet.” And where other rentals, at least for the moment, may still be very reasonable and offer great rewards to the right retailers.
Commercially viable
Andrew Kendall (Eris Property Group) says it simply: “The Cape Town CBD is a very different CBD. Where else would you get the views of Table Mountain, the Waterfront, be this close to beaches, other business hubs and some of the best residential in South Africa, as well as have everything from top-end hotels to backpacker establishments, on your doorstep?”
And in demand are buildings that fall into South African Property Owners Association’s (SAPOA’s) P-grade rating – the cream of the crop.
The Cape Town CBD boasts just under 25% of all P- and A-grade office space in the city. According to the most recent SAPOA quarterly report, the average A-grade rental is R100/m2 (up from R97.50/m2 in the first quarter of this year.) However, P-grade in the Central City is looking at rentals of R185/m2 (for example, in Old Mutual and FirstRand Bank’s joint venture Portside, on the corner of Bree Street and Hans Strijdom Avenue, which recently achieved a 5 Green Star SA Office Design rating from the Green Building Council of South Africa), and R160/m2 at 22 Bree Street (law firm Bowman Gilfillan’s new building). Currently under construction, both buildings are set to welcome their new tenants during the course of the next six months.
But what about the stories in the press about vacancies in the Central City? Andrew admits that these do exist, but points out that this often happens in older buildings that still claim A- or even B-grade status, but in terms of SAPOA’s rating (see www.sapoa.org.za) just don’t make the mark and without serious renovations and revamp, never will.
Explains Andrew: “You can have a building such as The Terraces (34 Bree St) where Growthpoint is achieving rentals of R110-120/m2, but just 200m down the road there is a building that was great in its heyday, but hasn’t been upgraded in decades. Its occupancy currently stands at only 30% which means that even at its R85/m2 asking it’s still considered to be too high for the condition of the building. It’s stuck back in the 1970s when it was built. The modern trend is for hot desking, green park environments, trendy and open plan.
“Certainly the new buildings coming on line are built from the start to state-of-the-art standards, but you can do amazing things with old buildings too – just look at the brilliant transformation of Newspaper House in St George’s Mall.”
City Views would like to thank the following for information supplied: Baker Street Properties, Eris Property Group, Life Residential, Pam Golding Properties and SAPOA.
This article first appeared in the August/September 2013 issue of City Views: Cape Town Central City in focus. Read it online.