PROPERTY: Vacancies In Cape Town May Have Peaked
Recent Western Cape Business News
In the commercial property market it is the lack of demand that is responsible for the reduction in office rentals to the levels we are experiencing today, says Dave Russell, a director of Baker Street Properties.
Russell says, “This lack of demand in the office market is confirmed in the latest SAPOA Office Vacancy Survey conducted at the end of August this year, where the figures show little sign of reducing vacancies. However, the fact that most vacancies in the nodes surveyed have remained relatively constant over the past 12 months leads us to believe that vacancies may have peaked.
“One node where we have seen a slight increase is in the Cape Town CBD where ‘A’ grade vacancies have now reached double figures at 10,3% with ‘B’ grade at 8,7%. While these figures are relatively high they are nowhere near the 15% reached in 1995.”
Russell adds, “In the Southern Suburbs the ‘A’ grade vacancy in Claremont is now 17% with the bulk of the available space in two buildings, however, in the Rondebosch/Newlands node the ‘A’ grade vacancy is 6,7% compared to 6,6% a year ago.
“In the north we see Bellville ‘A’ and ‘B’ grade vacancies remaining relatively level at 5,8% and 8,7% respectively and in Century City ‘A’ grade has reduced to 9,8%, however ‘B’ grade is slightly up and is now 7,6%.
“The V&A Waterfront has an overall vacancy of 3,6% and in Pinelands we see ‘A’ grade up to 7,3% with ‘B’ grade down to 1,6%.”
Russell says that as there are very few office developments presently under construction, there is very little in the form of new stock coming on to the market. He believes that low rental levels will therefore continue to restrict new office development, and with limited new space to add to the existing vacancies there is further reason to believe that vacancies have peaked.
“At this time in the property cycle there is the opportunity for tenants to position themselves for the long term. If they take the time to investigate the leasing opportunities that are available in the market today, I am sure they will be pleasantly surprised at the quality of properties available on favourable lease terms. In fact it may be possible in some instances to rent ‘A’ grade office space for the same price that one is presently paying for ‘B’ grade accommodation.
“On the other hand it is not all bad news for property owners. Even in this competitive market Baker Street Properties have continued demand from investors looking for quality investment opportunities in both the commercial and industrial sectors. This investor interest will only increase on the back of the recent reduction in interest rates,” concludes Russell.
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