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Friday Aug 24, 2012

Slower economy reduces demand for Cape Town office space

The office sector in Cape Town has a relatively high number of vacancies because of the slow economy, but space at prime locations is still being snapped up.

The rooftop of Milton Court was a pile of rubbish until the clean-up.

Billy Rautenbach, chief operating officer at Seeff, City Bowl, said that given the protracted economic downturn, many companies had downscaled in the past three years to try to contain costs and ride out the down-cycle .

"This situation is also not likely to improve until there is a notable uptick in the global economy, especially the euro zone, SA's largest trading partner.

"While high vacancy rates are obviously a concern and as close to full occupancy is always the ideal, a vacancy rate of around 10 percent to 11 percent is fairly standard internationally."

Rautenbach said that despite the economic downturn, rates still tended to be on the high side in the city and landlords could move closer to full occupancy by negotiating special deals and offering added incentives for businesses. However, she added, the CBD and Claremont in particular offered trendy spaces for retail and other creative businesses as well as SME and corporate businesses.

Selwyn Sharon, leasing, investment and sales consultant for JHI Properties, Western Cape, said developments such as Portside, 22 Bree Street, Foreshore's Atlantic Centre and Wembley Square were some of the new projects under way to provide primegrade offices for corporate clients from next year.

"These properties are already at least 50 percent let, as there has been a shortage of top-end offices, due to the paucity of new developments in the CBD over the past 15 years. Current vacancies in the CBD are between 10 and 12 percent, depending on the source. One needs to factor in the privately owned properties, which are not reflected on major property company websites or vacancy schedules."

He said most 80 000m2 to 90 000m2 buildings vacant in the CBD were B-grade offices or in buildings being upgraded to previous Agrade levels.

Sharon added that the Claremont node had about 20 percent vacancy, which would take time to fill.

"In these difficult financial times, expensive offices and parking are often the single largest overhead for businesses. Thus cost cutting and reduced budgets have taken their toll.

"Many ventures have reduced their requirements by staff reductions and the use of open-plan office design, which reduces average space per person by up to 50 percent."

Sia Thomatos, leasing and sales commercial broker for Broll Properties, said premium-grade offices in Cape Town were scarce so offices in new buildings such as the Convention Tower in the CBD were fully let.

"The Waterfront still has the highest rental rate, together with that of Cape Quarter and a few other properties in the Green Point vicinity. Waterfront rentals are in the region of R130 to R150/m2 gross. They also have a few new buildings on the cards and these will also command rentals of R180 to R210/m2," Thomatos said.

"So to finalise, office vacancies have increased. However, things seem stable, they have not increased fast, more at a steady pace. There are various reasons for vacancies, some companies have folded, some companies have downsized and some companies have relocated to areas like Century City."

Cape Argus

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