Growthpoint Properties, the JSE’s biggest primary listed REIT, said yesterday that it had signed 17 new deals for office space in Cape Town, signalling an increase in leasing activity, a willingness from new clients to commit to office space and possibly the beginning of a shift in office market sentiment.
“The surge of new office letting activity during the final two weeks of January was a welcome start to the year. The 17 new deals represent some 8 500m² of office space, with an average size of around 500m². The lease lengths also demonstrated a commitment to these offices, with a few of the leases signed exceeding seven-year terms,” Growthpoint regional asset manager for the Western Cape Timothy Irvine said.
South Africa’s office property was in oversupply with high vacancies well before the Covid-19 pandemic, trends that were accelerated by the work-from-home phenomena and changing work patterns, although Cape Town’s CBD had still attracted significant investment in new offices in the years prior to the pandemic.
Growthpoint’s latest experience resonates with other recent data. FNB’s Commercial Property Insights for the fourth quarter of 2021 showed that Cape Town was perceived by commercial property brokers as the outperforming city, and the market that had grown the fastest in 2021.
“Cape Town is not yet a clear outperformer in terms of market activity level, competing with the other two coastal metros. But it is perceived as the fastest improver. Another feature is that Gauteng metros are the underperformers,” the bank said, adding that Cape Town’s office property market activity rating was the highest of all the regions.
Over half of the Growthpoint office deals were with businesses in the financial and financial processing sectors. The rest were split between the creative industry sector, complementary retail in Growthpoint’s office buildings and education and training.
The deals were equally distributed between Cape Town’s CBD, southern suburbs and northern suburbs.
“This early positive trend in the office market supports anecdotal reports of an increase in traffic in the city, and seems to indicate the desire to get back to work and for businesses to return to full productivity,” said Irvine.
He said that while there would “undoubtedly be changes to how people work”, and the responses to this would vary between sectors and businesses, the uptick in leasing in January boded well for the Cape Town office market in 2022.
Growthpoint is invested in real estate and communities across Africa, Australia, the UK and eastern Europe. It is 50 percent co-owner of the V&A Waterfront in Cape Town.
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