The Cape Town CBD’s commercial property market has withstood the pandemic and is likely to remain tenacious despite concerns that the adoption of working from home will be the death of the office.
Rob Kane, CEO of Boxwood Property Fund and chair of the Cape Town Central City Improvement District (CCID), said resilient commercial property owners and businesses in the Cape Town city centre had adjusted to the “punishing economic effects brought on by Covid-19 last year”.
They were using flexible solutions to challenges to ensure the future success of the CBD. Solutions included rental holidays and discounts. Landlords would rather not lose tenants in the long term and take rental pain in the short term, Kane said.
Tenants could also sign shorter leases, sometimes monthly, and then use the offices’ facilities. Some of these tenants who had signed short monthly or two- or three-monthly leases during the hard lockdown had subsequently asked to sign multiyear leases.
Some landlords have converted parts of their office space into shared workspaces.
The CCID is a private-public non-profit organisation that manages and promotes the central area of the city. It was established in 2000 by local property owners with the aim of turning the city’s CBD into a safe, clean environment to attract investors, residents and tourists.
The CCID’s members include Boxwood Property Fund, Accelerate Property Fund, FWJK, Abland and Tsogo Sun Hotels.
Kane said it would be “misleading” to create the impression that the commercial property market in the Cape Town CBD is buoyant, but there had already been notable new lettings in 2021.
“Industries across the board had a hard time last year. However, most businesses have now adjusted, and we are expecting improvements in 2021,” he said.
The CBD had achieved a number of lettings for large offices towards the end of 2020 and in early 2021.
Activity had continued regardless of the lockdown restrictions that prompted work-from-home strategies for many big corporations and other businesses.
“Well-run buildings with good security, easy access and flexible office space still have high occupancy levels at good rental rates at present,” Kane said.
The Discovery Group recently signed a long lease on the ground floor of Boxwood’s entire Matrix building on the corner of Strand and Bree streets.
“This is a huge vote of confidence in the Cape Town CBD as a first-class location to do business,” said Kane.
A number of office-owning landlords have said they expect tenants to return to work in large numbers when SA is through the pandemic.
Norbert Sasse, group CEO of Growthpoint Properties, SA’s largest property company with exposure to R157.1bn worth of real estate, said in March it would take another year for office tenants across the country to decide if their staff will work from home permanently or on a part-time basis.
Multinationals and other employers with hundreds or thousands of employees needed staff to be in offices so they could be mentored and trained. Some industries needed teams to work together at factories and on sites.
Kane said the work-from-home trend would be short-lived, and untenable in the long run, as company executives were already finding that working in isolation was not as productive as collaborating with colleagues in the workplace.
“To be innovative and productive, people need other people in the workplace. Young people, especially, need the experience of working in groups with colleagues of all ages to learn the ropes in any line of work. I believe it won’t be long before companies move back to office-based business models,” said Kane.
Grant Silverman, marketing and leasing director at national developer Abland, said that flexible and creative landlords were well equipped to weather the coronavirus storm in 2021.
Abland’s latest Cape Town commercial project, a R500m development called 35 Lower Long on the Foreshore, was completed in 2020 at the height of the lockdown.
“Despite this, and a less-than-ideal office market, more than 50% of the office space in the signature 14-floor building has been taken up by law firm ENS,” said Silverman.
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