Cape Town market overview
A year in review
- Mieke Purnell
When compared to South Africa’s major metros, Cape Town’s office sector is supported by some of the strongest demand fundamentals. These include continuing high levels of semigration (skilled and semi-skilled labour), ongoing investment by blue-chip corporates, and better governance and lifestyle opportunities. Despite muted sentiment coming out of the pandemic period, evidence of renewed interest in Cape Town’s office market has emerged, as several landlords show continued commitment to upgrading existing older, but strategically located properties. Whilst demand will remain limited to select sub-locations and segments within the sector over the short to medium term, the overarching outlook remains positive.
Last year was a strong year for Cape Town’s industrial property sector. Economic growth resulting from the influx of skilled and semi-skilled labour to the Western Cape is one determinant of this demand, as it translates to the expansion of industries, manufacturing, and commerce, in turn elevating the demand for factories, warehousing, and distribution centres. Where the rest of the country has seen marked disparity between legacy (B- and C-grade) industrial properties and the logistics submarket, in 2022 Cape Town produced evidence of growing demand for both.
Cape Town’s hospitality market has struggled to recover from the COVID-19 pandemic due to its reliance on international leisure travel and having to compete with the more affordable and arguably more accessible uMhlanga hospitality sector for domestic leisure demand. That said, as pandemic-related restrictions were removed the sector saw noteworthy improvement in operating conditions. This was bolstered further by the popularity of the city among the growing market of ‘digital nomads’ that are taking advantage of the new ways of work. Despite these gains, occupancy and average room revenue levels still lag historical norms, and particularly so when the impact of inflation over the past three years is accounted for.