With Cape Town having once again received a clean audit from the Auditor General - for 2022/2023, coupled with the City’s close to R7 billion in infrastructure investment, and attracting over R3.5 billion in property investments, the Mother City is flying high on the radar of investors, tourists and semigrants alike.
Over many years, Cape Town has received numerous accolades, most recently including Best Worldwide City in the 2023 Telegraph Travel Awards - for the eighth consecutive year, and Africa’s Leading City Destination 2023 in the World Travel Awards Africa, among others.
“It’s no surprise that Cape Town saw a record-breaking influx of over 317 000 international passengers in December (2023), providing a welcome boost to the local economy,” says Marcus Te Vaarwerk, a director of Swindon Property. “This tourism boom, coupled with a clean bill of health from the Auditor General and significant investment in Cape Town, presents a meaningful opportunity for the city's commercial and industrial real estate market, fostering increased market sentiment and generating heightened interest among developers, investors and businesses.
“By leveraging this momentum and addressing potential challenges, generally achieving less severe loadshedding than other areas, the city can capitalise on a thriving and sustainable real estate sector that benefits investors, developers, and the broader community.”
Increased Demand for Space
Te Vaarwerk says with the rising number of visitors and with international arrivals set to continue in coming winter months, existing hotels are likely to witness high occupancy rates, potentially leading to expansion plans or new hotel developments.
“This translates into increased demand for land, construction materials, and skilled labour in the hospitality sector, while the retail and restaurant industry is expected to benefit, with more establishments likely to emerge in popular tourist areas, driving demand for commercial spaces and with the potential to revitalise underutilised areas.
“Logistics and warehousing which are already experiencing high demand for well-positioned space, are also poised to benefit from the tourism surge. The increased tourism activity implies a greater need for warehousing and logistics facilities to store and distribute various goods, from souvenirs to groceries. This is expected to result in greater demand for efficient and strategically located warehouses around the city, particularly in nodes such as Paarden Eiland, Montague Gardens and Cape Town International Airport.”
An ideally positioned, fully-tenanted, mixed-use property in Montague Drive in Montague Gardens, comprising mainly warehousing, plus retail and office space and with a total GLA of 5 394sqm, recently sold through Swindon Property for R37.5 million.
Enhanced Property Values
Adds Te Vaarwerk: “The increased demand for commercial and industrial spaces is anticipated to further drive up rentals and in time, property values. This presents a favourable scenario for investors who own existing properties or are looking to enter the market. The real estate sector is therefore likely to experience sound growth, with developers and investors positioned to benefit across the board, from off-plan sales to rising capital values and rental demand.”
Attracting Investment
Te Vaarwerk says Cape Town's tourism boom has also attracted the attention of international investors seeking lucrative real estate opportunities. This influx of capital has the potential to further boost development and infrastructure projects, creating a positive cycle for the entire market. The city is becoming an increasingly attractive destination for global investors, both in the commercial and residential markets respectively.
Says Te Vaarwerk: “Positively, the elevated tourism is also expected to generate new job opportunities across various sectors, including construction, hospitality, retail, and logistics, thereby contributing to economic growth and hopefully poverty reduction in the city over time. The increased tourism revenue can be reinvested in improving city infrastructure, such as transportation, public spaces, and waste management, enhancing the overall quality of life for residents.
“While rising property values benefit investors, there is a potential downside, as higher rents may pose challenges for local businesses and residents in affording commercial space, so striking a balance between growth and affordability is crucial to ensure the prosperity of all stakeholders.
“As a rapid influx of tourists can exert pressure on existing infrastructure, such as water supply and waste disposal, strategic planning and investment, together with sustainable development, are essential to accommodate the growing number of visitors without compromising the wellbeing of residents.”
READ: 7 mistakes to avoid when signing a commercial lease
In an article published in May 2023, High Street Auctions Director Greg Dart, said it’s crucial for landlords to invest wisely; prioritising digital systems that significantly improve the work environment or provide long-term cost benefits.
Dart, who has specialised in commercial real estate for more than a decade, has a landlords’ shortlist of technology investments that will attract the right tenants and maximise rental revenue.
The top tips:
Connectivity
“Top of the list is installing convenient plug-and-play infrastructure for high-speed internet access, which tenants demand from Day 1 in new premises.
“With every business now relying on cloud-based services and video conferencing, high-speed internet is a competitive necessity.
“Offering fast and reliable connectivity that’s available in every space in the building isn’t an optional expense for landlords anymore and the lack of it will show in vacancy rates.”
Energy
Dart says there are two aspects landlords should consider – renewables and intuitive smart systems.
“With the ongoing Eskom crisis, a huge selling point is offering renewable energy technology that keeps offices operational during load-shedding.
“Renewables also help reduce costs and carbon footprint, and appeal to tenants who are environmentally conscious by choice or corporate policy.
“Solar panels, wind turbines and geothermal systems are all examples of renewable energy technologies that can be used to power commercial buildings and offer uninterrupted power supplies.”
Certain smart, intuitive energy systems can also cut costs for landlords and tenants, one of the most beneficial being motion-activated lighting.
Security
Dart says advanced security systems are essential investments in high-crime countries like South Africa.
“They keep assets safe for both landlords and tenants, which is especially important for businesses that handle sensitive data.
“Good investments for landlords include access control systems, surveillance cameras with off-site back-up, perimeter security and intrusion detection systems.”
READ: Essential security tips for estate and complex owners to keep in mind
Smart Buildings
Dart says if landlords have covered the top three on the list, another investment they should consider is smart building technology.
“Smart building systems can help landlords manage their properties more efficiently and effectively, reducing operating costs while improving the tenant experience.
“For example, installing climate control systems can help landlords cut energy costs; at the same time providing tenants with greater control over their workspace.
“Another aspect is offering online portals for tenant management. Online portals allow tenants to pay rent, report maintenance issues, and communicate with the landlord or property manager, all from the convenience of their computer or smartphone.
“This can save landlords time and resources, while also improving tenant satisfaction.”
Dart says in the post-Covid market with office vacancies still high, commercial property tenants are spoilt for choice.
“By making the right technology investments, landlords can future-proof their properties and stay ahead of the competition. This short-term expenditure will pay off handsomely in long-term revenue gains.”
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