Cape Town Commercial Property Market Insights

Office Market

Industrial Market

Retail Market

1. Flight to Quality Accelerates

Tenants across all sectors are prioritizing A-grade buildings with backup power infrastructure. Properties with full generator capacity (8+ hours) and high-speed fibre are commanding 15-25% rental premiums over comparable buildings without these amenities.

• A-grade office vacancy at 6.8% (lowest in 15 years)
• B-grade and P-grade vacancies rising to 12.5% and 18.3% respectively
• Green Star certified buildings achieving 8-12% higher rents

2. Industrial Boom Continues

E-commerce and 3PL demand continues to drive the industrial market. Montague Gardens, Airport Industria, and Parow are experiencing the tightest vacancy, with modern warehouses (8m+ eaves) achieving full occupancy within weeks of listing.

• Prime logistics facilities at 3.2% vacancy (effectively full)
• Rental growth of 11.3% YoY (highest of all sectors)
• Cold storage and last-mile facilities commanding premium rates

3. Decentralization from CBD

Hybrid work models and improved suburban infrastructure are driving tenant migration from the CBD to nodes like Century City, Tyger Valley, and Claremont. These nodes offer superior amenities, parking ratios, and employee quality-of-life factors.

• Century City vacancy at 4.1% (tightest in Cape Town)
• CBD vacancies improving but still elevated at 11.5%
• Northern Suburbs nodes gaining market share

4. Retail Bifurcation Deepens

The gap between premium super-regional malls and struggling secondary centers continues to widen. Experiential retail (dining, entertainment) and convenience retail (neighborhood centers) are outperforming, while traditional goods-based retail faces pressure from e-commerce.

• V&A Waterfront, Canal Walk, Tyger Valley performing strongly (sub-5% vacancy)
• B-grade malls facing 15%+ vacancy and rental pressure
• Convenience retail (neighborhood centers) achieving 7-9% rental growth

The Cape Town commercial property market closed 2024 on a strong note, with all three sectors (office, industrial, retail) showing improved fundamentals compared to 2023. Industrial led performance with sub-7% vacancy, while office quality differentiation intensified.

Q3 saw continued absorption in prime office and industrial nodes, with e-commerce driving logistics demand and financial services supporting CBD office take-up. Retail showed early signs of recovery in premium malls.

Mid-year market showed positive momentum across all sectors. Flight to quality intensified as tenants prioritized buildings with backup power and green certifications. Industrial vacancy reached record lows.

Opportunities

• Prime Logistics: Tight vacancy (3-4%) and strong rental growth (8-10%) support investment case
• A-Grade Office (CBD): Historically low vacancy (6-7%) creates pricing power
• Mixed-Use Precincts: Century City, Waterfront offer integrated live-work-play appeal
• Value-Add B-Grade: Refurbishment to add backup power/green certs can unlock 20%+ rental upside

Risks

• Interest Rates: High rates (11.75% repo rate) pressure valuations and affordability
• Load Shedding: Ongoing power challenges increase capex requirements (generators, solar)
• B/P-Grade Office: Structural oversupply and tenant flight to quality creates downward pressure
• Secondary Retail: E-commerce and weak consumer spending challenge viability