Real Estate Investor Magazine South Africa October 2018 | Page 27

CBD INVESTMENTS
other equally important parametres by which a downtown area
needed to measure its overall success.
“We always look to best practice abroad for this, not only to
see how we measure up but how we can improve our offering
as a central business district,” said Evangelinos, quoting from
a document Why downtown is important, published by the
USA-based organisation, Main Street, that notes 10 points by
which a downtown could best measure its own success.
The points around which downtowns could be measured
included whether they were:
• Prominent employment centres and often, collectively, a
city’s largest employer
• A reflection of community
• Representative of a significant portion of a city’s tax base
• An ideal local for independent businesses, owned by local
owners
• The historic core of a city
• An area that reduces sprawl
• An area that protects property values
• An important government centre
• An important civic forum where members of a city can
congregate; and of course
• The representation of huge public and private investment.
“The Cape Town CBD fairs well against all of these,” noted
Evangelinos, “and this allows the Central City to stand out
among the crowds of other cities and business districts seeking
to lure new businesses and inhabitants into the area.
“But certainly, we still have work to do – not least of which
is making the Central City as inclusive and welcoming as
possible. And working out, together with our economic
development partners at the City and Province, how best to go
about filling the gaps we have, in terms of things such as the
exact number of people who work in the Central City or the
value of the CBD’s own GDP?
“How do we, for example, encourage more small businesses
to be established in the Cape Town Central City while still
welcoming large corporates? How do we better communicate
with our existing residential community while growing it to
include the broader economic groups who contribute to our
downtown? How do we change developers’ mindsets around
building more affordable accommodation to house people who
work downtown, or how can we best support the City in its
efforts to deal with the challenges around public transportation
to and from our CBD?”
Commenting on the information that the CCID currently
had, Koblitz noted that the publication of The State of
Cape Town Central City Report as an investment guide to
the CBD over the past six years, had enabled the CCID to
collect, analyse and trend important information in terms
of: the change in the business environment and the rise of
new sectors – most recently in the convention/eventing and
medical spheres, the diversity of the formal retail sector, the
nature of the visitor economy, and property investment across
both the public and private sectors and, in regard to the latter,
the trends behind both the commercial and residential sectors.
In terms of the commercial sector, Koblitz noted there had
been a slight (1%) increase in office vacancies in the CBD, up
from 9.9% at the end of December 2017 to 10.9% at the end
of the first quarter of 2018.
Regarding residential, she noted: “2017 saw 228 units
transferred to owners, to a total value of R568 million. For the
first six months of 2018, we have seen 153 units transferred to
a value of R357m.
“There has been a drop in the average sales price from
R2.769m at the end of 2017, to R2.331m as at June 2018, and
this has also indicated a 5.4% decrease in the average rand per
square metre, from R41 287/m2 at the end of 2017 to R39
038/m2 as at June 2018.”
“However, it is important to note that the new units coming
onto the market and making up the lion’s share of all units
transferred, are getting significantly smaller year-on-year. Back
in 2013, the average size of units transferred was around 82m².
By 2016, this had dropped to 71m², and the latest indicators
are for units around 60m².”
Speaking to current monthly rentals in the Central City,
Koblitz noted there had been a significant increase in the
number of rentals units available on the market for rent over
and above those recorded in December 2017: “We currently
have 280 units to rent in the CBD, versus 150 in December
2017. We’ve also seen a significant decline in average monthly
rentals being asked. In December 2017, the average for a studio
was R12 186, and it is now R11 286. A one-bedroom averaged
R14 747 in December 2017 and now averages R13 792, while
a two-bedroom averaged at R24 967 in December 2017 and
now averages R20 800. A three bedroom, at an average of R59
000 per month in December 2017 is now down to R37 278.”
Noting that this was heartening for those looking to rent
in the Cape Town CBD, Koblitz also cautioned buyers who
were looking to invest in units for the rental market. “There is
obviously quite a bit of choice available and we are assuming
there is also a great deal of room for negotiation on behalf of
prospective rental tenants. We have also seen a huge increase
in rentals of units that are furnished, which tells us that many
of these were quite possibly bought originally for short-term,
holiday lets and are now being released into the marketplace
for longer lets.”
Also presenting on the morning, was Sandra Gordon, senior
research and market analyst for Pam Golding Properties,
who took an expanded look at the Central City’s residential
market over the past few decades: “In recent years, the City of
Cape Town’s housing market has significantly outperformed
the other major metro markets in South Africa. One factor
which has undoubtedly contributed to the robust performance
of Cape Town’s residential market is the influx of older, more
affluent homebuyers from across the country in recent years –
the so-called semigration trend.
“Much of the activity in the Cape housing market has
been concentrated in the well-established sub-regions of the
Atlantic Seaboard, the City Bowl and the Southern Suburbs.
After several years of robust growth, these areas are, however,
now leading the slowdown in both activity and pricing
currently evident in the Cape metro housing market.”
Noting that Cape Town Central City was perhaps not
the largest major city centre housing market in South
Africa, either in terms of unit sales or total housing stock,
it nevertheless commandeered the highest prices, and by a
considerable margin.
“The popularity of the CBD residential market is evident
in the rapid growth in new residential units in recent decades
– from just 762 apartments 20 years ago to a current total of
4  215 units. It is estimated that within the next two years a
further six developments and refurbishments will raise that
total to at least 4 902 units.”
SOURCE
Cape Town Central City Improvement District
SA Real Estate Investor Magazine OCTOBER/NOVEMBER 2018
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