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Aug 14, 2008:
Research shows that commercial vacancy rates in Cape Town's decentralised areas are on the rise, but apparently this is nothing to worry about.
"Commercial vacancy rates in Cape Town's decentralised areas are on the rise", says eProp's research for July 2008. One of Cape Town's largest decentralised nodes, the Tyger Valley commercial area, has a vacancy rate for July of around 8.9%, up from 4% in February 2008.
"This might seem like a very high vacancy rate, but", assures Pieter-Jozua Erasmus of Capitol Commercial Properties, "a vacancy rate of 10% is average and nothing to be alarmed about".
One of the major factors influencing the rise in vacancies during 2008 is the increased supply of commercial stock in the area, says Erasmus. A number of new office buildings have recently been completed, or will be completed within the next three months, and these have increased the amount of available space and therefore the vacancy rate.
Another factor to keep in mind is the rental rates in the area. "Tenants have experienced a period of very little rise in rental rates between 2002 and 2006", says Erasmus. "Rental rates have been low at around R60 - R65 per square meter (excluding VAT and parking) during this time and the market has been adjusting to a drop in vacancy rates during a period of increased economic growth, increased interest rates, an increase in the cost of building materials and higher rates of service providers."
"When we see a drop in A+ Grade vacancies due to a rise in office demand, we reckon that the rental rates for new office buildings currently in the planning phase will jump to levels of around R135 – R145/m² plus VAT," he says. "The above-mentioned economic factors are causing developers of new developments to be cautious of rental rates below the R135 – R145/m² level and, according to various Quantity Surveyors, projects currently in the planning phase are not viable at rates below the said level."
"Tenants must realise that these price increases are necessary when one considers the cost and effort of constructing a building. As developers become more aware of their environmental responsibility they are constructing energy efficient buildings. Avanti on the corner of Carl Cronje and Bill Bezuidenhout Roads, has managed to save more than 50% of their air-con energy just by their choice of glass fitted in this twin-towered commercial building. They also have a back-up generator installed and offer ample parking for tenants as well as clients. This building is a joint venture between Arun and Abland."
Not many building projects are currently under construction in the Tyger Valley area and when the vacancies in these new developments are taken up Erasmus believes the market will see a drop in vacancies in the short to medium term as new developments may take a further 18 months to complete. He therefore predicts lower vacancy rates in the Tyger Valley area a year from now.
"As the popularity of the area continues to grow and the new buildings currently on offer are let or sold, there will again be a lack of commercial stock in this market, so now is the time to have a careful look at the availability of premises should you wish to re-locate your operation in the next 18 months", he advises.
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