Cape Town ‘investibility’ remains intact

Despite a year of great political and economic uncertainty, compounded by the worst drought in 100 years, the City of Cape Town has continued to attract investment.

About R24 billion of investment has, conservatively, been committed to the Cape Town central city since the start of 2017. This includes developments that opened their doors during 2017 (R3.5 billion), as well as those currently under construction (R4.5 billion), in the planning stage (R1.63 billion) or proposed (R14.2 billion). This is a step up from the R16.232 billion of investment recorded in 2016.

These figures are taken from The State of the Cape Town Central City Report which is published by the Cape Town Central City Improvement District (CCID) and reflects on the economic climate in the CBD.

The figures recorded are conservative as the researchers only include confirmed values for developments. “Not all developers are prepared to reveal the estimated values of the projects with which they are involved. Hence, the actual figure would be higher than stated,” says Rob Kane, chairperson of the CCID.

With the City of Cape Town’s last official property valuation, released for the 2016/17 financial year, reflecting a value at the time of over R30.6 billion, the new investments listed in the report at R23.9 billion could see official property valuations in the CBD doubling within the next five to ten years. In 2012, when the first report was published, just ten new developments were listed – the 2017 report now lists 48, Kane adds.

Commercial property has held its own over the past year in the central city, with the 2017 report reflecting vacancies at 9.9%, while retail vacancies across the CBD stood at only 7% for the year under review.

The report also indicates that residential property remains strong in the central city, with those transferred during 2017 averaging R2.8 million per unit (up 18.5% year-on-year from R2.3 million during 2016). In terms of R/m², the 2017 report reflects an average of R41 287/m² (versus R33 921/m² during 2016).

“This is a year-on-year increase in R/m² of 21.72%,” says Kane. “However, we must also take into account that the average size of units has decreased. The central city, as it gains in popularity, is following the same trend reflected in popular cities across the globe: residents are settling on smaller living spaces so that they can be part of a vibrant downtown.”

Cape Town CBD by numbers 

Source: The State of the Cape Town Central City Report

Unsurprisingly, given its location as a premier tourist destination, Cape Town’s inner city is dominated by retail and entertainment facilities. However, the presence of the Cape Town High Court ensures that the legal fraternity is well represented. The financial sector (banking, investment and insurance) remains strong and is the third largest sector in the CBD. The industries that make up the accommodation and travel sector have declined for the first time, according to the report, to fifth place. Instead, the presence of medical professionals has more than doubled in the central city in the last year. This is due to the closing down of the old Netcare Christiaan Barnard Hospital and the opening of the new expanded, state-of-the-art hospital, of the same name, towards the foreshore.

The report also notes that priority industries with potential for investment and growth include the business process outsourcing industry, which with about 40 call centres located in the city, has been a big provider of jobs over the last ten years. In addition, digi-tech companies continue to grow, supported by the presence of global e-tailers like Amazon. A more recent trend is the development of Cape Town as a knowledge hub for the green economy due to local and regional government support.

It is also worth noting that Cape Town avoided a downgrade from Moody’s last year, retaining its investment grade rating of Aaa.

However, Cape Town’s poor spatial design and weak transport infrastructure threaten to hobble the growth initiatives detailed in the report. With this in mind, the city has combined transport, urban planning, public housing and environmental sustainability under one entity. Five projects have been identified for investment in the improvement of existing public transport infrastructure or new infrastructure to ignite urban renewal, economic growth and job creation in these areas.

These include the Foreshore Freeway Project where six hectares of land will be developed that will include affordable housing and mixed-use developments while addressing traffic congestion; a new MyCiTi station will be developed at Phillipi East, developing the area as a key transfer point; in addition, the Bellville CBD will be revitalised by investing in public transport infrastructure which will catalyse other developments.

The city is also spending R3.3 billion on the water crisis. Of this R2 billion will be on capital expenditure and R1.3 billion on operating expenses.

Perhaps for these reasons Cape Town was ranked 21^st on the Global Cities of the Future list, published by a division of the Financial Times. It was the only African city to make the list.

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