Cape Town’s clean audit & tourism boom bodes well for commercial property market

With Cape Town having once again received a clean audit from the Auditor General - for 2022/2023, coupled with the City’s close to R7 billion in infrastructure investment, and attracting over R3.5 billion in property investments, the Mother City is flying high on the radar of investors, tourists, and semigrants alike.

Over many years, Cape Town has received numerous accolades, most recently including Best Worldwide City in the 2023 Telegraph Travel Awards - for the eighth consecutive year, and Africa’s Leading City Destination 2023 in the World Travel Awards Africa, among others.

“It’s no surprise that Cape Town saw a record-breaking influx of over 317 000 international passengers in December (2023), providing a welcome boost to the local economy,” says Marcus Te Vaarwerk, a director of Swindon Property. “This tourism boom, coupled with a clean bill of health from the Auditor General and significant investment in Cape Town, presents a meaningful opportunity for the city's commercial and industrial real estate market, fostering increased market sentiment and generating heightened interest among developers, investors, and businesses.

“By leveraging this momentum and addressing potential challenges, generally achieving less severe loadshedding than other areas, the city can capitalise on a thriving and sustainable real estate sector that benefits investors, developers, and the broader community.”

Increased Demand for Space

Te Vaarwerk says with the rising number of visitors and with international arrivals set to continue in the coming winter months, existing hotels are likely to witness high occupancy rates, potentially leading to expansion plans or new hotel developments.

“This translates into increased demand for land, construction materials, and skilled labour in the hospitality sector, while the retail and restaurant industry is expected to benefit, with more establishments likely to emerge in popular tourist areas, driving demand for commercial spaces and with the potential to revitalise underutilised areas.

“Logistics and warehousing which are already experiencing high demand for well-positioned space, are also poised to benefit from the tourism surge. The increased tourism activity implies a greater need for warehousing and logistics facilities to store and distribute various goods, from souvenirs to groceries. This is expected to result in greater demand for efficient and strategically located warehouses around the city, particularly in nodes such as Paarden Eiland, Montague Gardens, and Cape Town International Airport.”

An ideally positioned, fully-tenanted, mixed-use property in Montague Drive in Montague Gardens, comprising mainly warehousing, plus retail and office space and with a total GLA of 5 394sqm, recently sold through Swindon Property for R37.5 million.

Enhanced Property Values

Adds Te Vaarwerk: “The increased demand for commercial and industrial spaces is anticipated to further drive up rentals and in time, property values. This presents a favourable scenario for investors who own existing properties or want to enter the market. The real estate sector is therefore likely to experience sound growth, with developers and investors positioned to benefit across the board, from off-plan sales to rising capital values and rental demand.”

Attracting Investment

Te Vaarwerk says Cape Town's tourism boom has also attracted the attention of international investors seeking lucrative real estate opportunities. This influx of capital has the potential to boost development and infrastructure projects further, creating a positive cycle for the entire market. The city is becoming an increasingly attractive destination for global investors, both in the commercial and residential markets respectively.

Says Te Vaarwerk: “Positively, the elevated tourism is also expected to generate new job opportunities across various sectors, including construction, hospitality, retail, and logistics, thereby contributing to economic growth and hopefully poverty reduction in the city over time. The increased tourism revenue can be reinvested in improving city infrastructure, such as transportation, public spaces, and waste management, enhancing residents' overall quality of life.

“While rising property values benefit investors, there is a potential downside, as higher rents may pose challenges for local businesses and residents in affording commercial space, so striking a balance between growth and affordability is crucial to ensure the prosperity of all stakeholders.

“As a rapid influx of tourists can exert pressure on existing infrastructure, such as water supply and waste disposal, strategic planning and investment, together with sustainable development, are essential to accommodate the growing number of visitors without compromising the wellbeing of residents.”