Most nodes are not showing improvements in vacancies. New business growth that should translate to demand for offices is still limited.
Russell says, "The 3rd quarter SAPOA Office Vacancy Survey confirms that Cape Town's CBD secondary buildings in particular are contributing to rising vacancies with B grade reaching 13.7% and C grade 26.9%. The overall vacancy for all grades in the CBD is now 14.7%. The new stock scheduled to come on stream in the next few months will further add to escalating vacancies. The southern suburbs saw a reduction in vacancies, with Claremont moving from 21.5% to 11.3% as a result of a large take up of office space by a call centre. The Rondebosch/Newlands node saw a slight reduction to 5.3% from 5.9% in the previous quarter whilst in the northern suburbs node of Bellville, vacancies increased from 8% to 9.6%".
"As new developments reached completion in Century City and the V&A Waterfront, there has been a marginal increase in vacancies in each of these nodes to 5.9% and 3.7% respectively. These low vacancy levels reflect the continued appeal of these locations to office tenants."
"During the past quarter we have seen the completion of the Allan Gray building totalling 18,000m² in the V&A Waterfront and new offices for Bowman Gilfillan in 22 Bree Street in the Cape Town CBD measuring 10,000m². In Century City, the Park Lane precinct of 5,800m² has reached completion and a further 7,000m² will be completed by the last quarter of 2013, when the Business Centre and No 3 Bridgeways come on stream," adds Russell.
Overall Cape Town vacancies this quarter increased to 10.4% from 9.8% in Q2 2013. The bulk of these vacancies are in the secondary office market, where some space has been vacant for long periods and shows little chance of being leased, as some landlords continue to pitch asking rentals above market expectations.
Russell concludes, "The South African economy remains subdued with a minimum of new jobs being created. This is expected to keep office demand at low levels, driven mainly by corporate consolidations and a marginal take up of quality office space, thus leaving secondary buildings with large vacancies, particularly in the CBD. New speculative developments that are added to the market are addressing the need for quality buildings, but are not driven by business growth. This will add further pressure to vacancy levels in the Cape Town CBD secondary market, as occupiers upgrade to meet their corporate image. Rentals in the Cape Town CBD are therefore expected to remain flat."
