Cape Town is experiencing a significant shortage of office space, with occupancy rates recently hitting their highest levels in 15 years, further positioning the city as a strong contender against Johannesburg as South Africa’s economic hub, Cape {town} Etc reports.
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According to The Financial Mail, Cape Town’s office vacancy rate has dramatically decreased, dropping from nearly 14% to 6.3% in just two years – the lowest since 2009.
A recent survey by the South African Property Owners Association (SAPOA) revealed that Johannesburg’s office vacancy rate stood at 16.9% in the second quarter of 2024.
Although this marks an improvement from 19.5% in Q2 2022, it remains significantly higher than the 12.5% vacancy rate recorded at the end of 2019.
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An article by Bizcommunity attributes Cape Town’s office space boom primarily to the city’s effective service delivery and a resurgence in tourism. These factors have drawn investors from other provinces, many of whom are relocating their businesses and families to Cape Town.
Additionally, multinational companies are increasingly recognising Cape Town as a prime location for new investments and business operations.
This influx of visitors and investors has significantly increased demand for office space in Cape Town. However, the presence of troubled assets could impact overall rental growth if property owners resort to offering incentives such as reduced rents to attract tenants.
SAPOA identified areas like Sandton, Johannesburg CBD, and Durban CBD as having a high concentration of troubled assets in the second quarter of 2024, suggesting economic challenges or market saturation in these regions.
Within Sandton, a stark contrast was observed in office vacancy rates: the older, historic core had a vacancy rate exceeding 34%, while the newly developed core had a much lower rate of 9.3%.
Troubled assets refer to properties facing financial difficulties, such as long-term vacancies, legal issues, or the need for significant repairs. To attract tenants, owners of these properties might offer incentives like rent reductions, which could exert downward pressure on rental growth in the market.
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