Measurements that can make a difference
BY CAROLA KOBLITZ
Public and private sector are critical to the success of a downtown. Without the buy-in from each of these sectors, a downtown simply ends up as one that doesn’t work. CCID chairperson Rob Kane noted that a successful downtown was the most visible indicator of a successful city, and reflected whether that downtown would be an asset or a liability in its efforts to recruit new businesses and economic sectors, as well as residents and visitors from both locally and abroad.
“It’s also key to retaining existing investment,” said Kane. Referring to the Cape Town Central City, he noted that of the 13 development and redevelopment projects that had come on line during the previous (2017) year, included:
Six public sector investments, across local, provincial and national government (ie: the new CTICC expansion, the redevelopment of the Strand Concourse, the upgrade of both the College of Cape Town and the Master of the High Court, ongoing upgrades to the Cape Town Station, and upgrades to the Iziko museum and planetarium in The Company’s Garden), to a total value of R1.198 billion.
Six private sector investments (on the commercial side, upgrades to 4 Loop Street, Pier Place, Speaker’s Corner and around the Church Square precinct. On the accommodation front, including hotels and residential, there was the upgrade of Tsogo Sun’s Cape Sun, the opening of the new Tsogo Sun SunSquare and StayEasy hotels, the opening of the Radisson Blue Hotel & Residence and the completion of The Sentinel residential complex), to a total value of R2.350bn.
“Going forward, the 35 other developments currently under construction or in either a planning or proposed phase – all of which are hoped to start construction by 2020 – very healthily continue this trend of commitment from both the public and private sectors, and reflect an additional value, very conservatively speaking, of an additional R19.306bn.”
Kane stressed that the term “conservatively” was used, as: “Not all development values are currently known to us as the CCID and as the publishers of the annual investment guide, The State of Cape Town Central City Report, the last edition of which looked at 2017 in review.”
In his address on the morning, CCID CEO Tasso Evangelinos noted that while equal investment from across both the public and private sectors were vital to the success of a downtown like the Cape Town Central City, there were also other equally important parametres by which a downtown area needed to measure its overall success.
“We always look to best practice abroad for this, not only to see how we measure up but how we can improve our offering as a central business district,” said Evangelinos, quoting from a document Why downtown is important, published by the USA-based organisation, Main Street, that notes 10 points by which a downtown could best measure its own success.
The points around which downtowns could be measured included whether they were:
Prominent employment centres and often, collectively, a city’s largest employer
A reflection of community
Representative of a significant portion of a city’s tax base
An ideal local for independent businesses, owned by local owners
The historic core of a city
An area that reduces sprawl
An area that protects property values
An important government centre
An important civic forum where members of a city can congregate; and of course
The representation of huge public and private investment.
“The Cape Town CBD fairs well against all of these,” noted Evangelinos, “and this allows the Central City to stand out among the crowds of other cities and business districts seeking to lure new businesses and inhabitants into the area.
“But certainly, we still have work to do – not least of which is making the Central City as inclusive and welcoming as possible. And working out, together with our economic development partners at the City and Province, how best to go about filling the gaps we have, in terms of things such as the exact number of people who work in the Central City or the value of the CBD’s own GDP?
“How do we, for example, encourage more small businesses to be established in the Cape Town Central City while still welcoming large corporates? How do we better communicate with our existing residential community while growing it to include the broader economic groups who contribute to our downtown? How do we change developers’ mindsets around building more affordable accommodation to house people who work downtown, or how can we best support the City in its efforts to deal with the challenges around public transportation to and from our CBD?”
Commenting on the information that the CCID currently had, Koblitz noted that the publication of The State of Cape Town Central City Report as an investment guide to the CBD over the past six years, had enabled the CCID to collect, analyse and trend important information in terms of: the change in the business environment and the rise of new sectors – most recently in the convention/eventing and medical spheres, the diversity of the formal retail sector, the nature of the visitor economy, and property investment across both the public and private sectors and, in regard to the latter, the trends behind both the commercial and residential sectors.
In terms of the commercial sector, Koblitz noted there had been a slight (1%) increase in office vacancies in the CBD, up from 9.9% at the end of December 2017 to 10.9% at the end of the first quarter of 2018.
Regarding residential, she noted: “2017 saw 228 units transferred to owners, to a total value of R568 million. For the first six months of 2018, we have seen 153 units transferred to a value of R357m.
“There has been a drop in the average sales price from R2.769m at the end of 2017, to R2.331m as at June 2018, and this has also indicated a 5.4% decrease in the average rand per square metre, from R41 287/m2 at the end of 2017 to R39 038/m2 as at June 2018.”
“However, it is important to note that the new units coming onto the market and making up the lion’s share of all units transferred, are getting significantly smaller year-on-year. Back in 2013, the average size of units transferred was around 82m². By 2016, this had dropped to 71m², and the latest indicators are for units around 60m².”
Speaking to current monthly rentals in the Central City, Koblitz noted there had been a significant increase in the number of rentals units available on the market for rent over and above those recorded in December 2017: “We currently have 280 units to rent in the CBD, versus 150 in December 2017. We’ve also seen a significant decline in average monthly rentals being asked. In December 2017, the average for a studio was R12 186, and it is now R11 286. A one-bedroom averaged R14 747 in December 2017 and now averages R13 792, while a two-bedroom averaged at R24 967 in December 2017 and now averages R20 800. A three bedroom, at an average of R59 000 per month in December 2017 is now down to R37 278.”
Noting that this was heartening for those looking to rent in the Cape Town CBD, Koblitz also cautioned buyers who were looking to invest in units for the rental market. “There is obviously quite a bit of choice available and we are assuming there is also a great deal of room for negotiation on behalf of prospective rental tenants. We have also seen a huge increase in rentals of units that are furnished, which tells us that many of these were quite possibly bought originally for short-term, holiday lets and are now being released into the marketplace for longer lets.”
Also presenting on the morning, was Sandra Gordon, senior research and market analyst for Pam Golding Properties, who took an expanded look at the Central City’s residential market over the past few decades: “In recent years, the City of Cape Town’s housing market has significantly outperformed the other major metro markets in South Africa. One factor which has undoubtedly contributed to the robust performance of Cape Town’s residential market is the influx of older, more affluent homebuyers from across the country in recent years – the so-called semigration trend.
“Much of the activity in the Cape housing market has been concentrated in the well-established sub-regions of the Atlantic Seaboard, the City Bowl and the Southern Suburbs. After several years of robust growth, these areas are, however, now leading the slowdown in both activity and pricing currently evident in the Cape metro housing market.”
Noting that Cape Town Central City was perhaps not the largest major city centre housing market in South Africa, either in terms of unit sales or total housing stock, it nevertheless commandeered the highest prices, and by a considerable margin.
“The popularity of the CBD residential market is evident in the rapid growth in new residential units in recent decades – from just 762 apartments 20 years ago to a current total of 4 215 units. It is estimated that within the next two years a further six developments and refurbishments will raise that total to at least 4 902 units.”
Source: Cape Town Central City Improvement District