Well-run Cape Town has shown its appeal to international businesses wanting to set up call centre operations, driving demand for space in the city.
Just before the start of the Covid-19 pandemic in March 2020, there was limited availability to cater for the business process outsourcing (BPO) sector, but demand from these businesses rose further with tenants snapping up space in Cape Town at competitive rentals with fit-out deals included in their leases.
“Thanks to the boom in the BPO sector, tech and software companies, the office market in Cape Town is picking up, with vacancy reduction in many buildings,” said Ashleigh Müller, MD and principal broker at Ask Ash commercial property brokerage firm.
Müller said that with many office buildings being converted to residential apartments supply is limited now. With increased load-shedding, poor connectivity and juggling the work-life balance, many people are battling to work from home, resulting in the increase in enquiries for office space.
She said that Cape Town makes it easier than other parts of the country for these companies to do business thanks to the Cape BPO, the City and Western Cape government’s strategic business partner responsible for the growth and development of the sector in the region. It serves as the regional trade association and industry body to promote Cape Town and the Western Cape as an offshore location of choice for BPO operations in targeted source markets including the US and the UK, among other functions.
Many businesses are relocating to Cape Town and driving demand for space. Towards the end of 2022, Cape Town had a shortage of premium grade or top-drawer offices outside the CBD as many other corporates were taking up space in buildings closer to residential areas and at good rentals, said Müller.
CCI, an organisation providing call centre services to companies globally, leased offices through Ask Ash measuring about 4,400m² at Newlands Terraces, a building owned by JSE-listed Emira Property Fund.
She said many call centre businesses are looking for secure office space in the northern and southern suburbs, Cape Town CBD and Century City, with most close to public transport as well as retail and food outlets.
A high-end call centre typically requires A-grade or premium offices where rentals range from R180/m²-R270/m², while B-grade offices command R130/m²-R170/m².
Müller said that in 2022 CCI took its first space in Cape Town of 2,500m² and soon after took another floor in the same building, owned by JSE-listed Heriot Reit.
She said that for a single office user to take up so much space in the current market was a big deal. “Post the pandemic, we are seeing a lot more tenants relocating to more affordable offices, downscaling to smaller spaces, and some completely choosing to work remotely.”
According to Ulana van Biljon, COO of Emira Property Fund, the CCI deal is a big office lease in the present SA environment, where the economy is battling headwinds including load-shedding, high inflation and interest rates.
Van Biljon says demand is driven by the supply of good office space, with international companies “probably taking advantage of our high unemployment levels and therefore staff availability”.
Emira’s office portfolio consists mainly of premium and A-grade properties. The company constantly refurbishes common areas at these buildings to stay relevant to the area and retain tenants.
Growing BPO sector
According to the Cape BPO, the industry in SA has grown fast in the past four year, at about 22% a year. This is twice the industry’s global growth rate and three times faster than in India and the Philippines.
Clayton Williams, CEO of the Cape BPO, told Business Day that in the past 10 years the Western Cape experienced growth of about 20% a year. More than 38,000 new and sustained international jobs were created.
“During 2019 and 2022, over 16,000 net new and sustained jobs were created, and between April 1 and December 31 2022, nearly 6,000 new international jobs have been recorded,” said Williams.
Williams said the city represents the largest and most mature region in terms of international delivery in SA. “Outsourced and offshored services have been provided to international clients for more than 25 years from Cape Town, and the region has often been the first locality for multinational BPO operators to set up in once they have made the decision to offshore their operations to SA.”
He said they had seen diversification of operations from Cape Town into other SA regions once these companies reached a certain size and scale, presenting an opportunity to mitigate the risk of concentration.
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