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Could Cape Town CBD be among the first to bounce back?

‘Once Covid-19 passes, pent-up demand should unleash a wave of foreign visitors’ – economist.
According to the 2019 State of Cape Town Central City Report, the value of property in the city centre soared nearly 40%, from 2016/2017 to 2018/2019, to R42.8bn. Image: Dwayne Senior, Bloomberg

Cape Town is on many a traveller’s bucket list, with its iconic attractions such as Table Mountain and blue-flag beaches – and proved an excellent investment destination in 2019.

According to the 2019 State of Cape Town Central City Report (SCCR), the year “proved to be dynamic, resilient and ever-expanding, driving investment into what is arguably the most successful city centre in South Africa”.

Since the inception of the Cape Town Central City Improvement District by local property owners in 2000, board chair Rob Kane says the body has sought to keep the city crime-free, clean and open for business.

Kane says the central city held its own, despite 2019 being an incredibly difficult year: “Stakeholders and investors in the CBD have had to cope with the aftermath of the 2018 drought and subsequent water crisis, ongoing load shedding and a tough economic climate.”

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Developments 

The central business district did well in 2019, with the total value of property investments in the proposed, planned, under-construction or completed phases is R13.83 billion, with the Foreshore precinct emerging as a key property investment node. The report attributes this in part to the expansion of the Cape Town International Convention Centre, which it said contributed R4.5 billion to the Western Cape’s gross geographic product.

The report puts the 2018/2019 value of central city property at more than R44 billion.

Projects completed in 2019 include the Signature Lux Hotel in Heerengracht Street, the Capetonian Hotel on Heerengracht Street, and The Halyard on Christiaan Barnard Street. Planned developments include the Telkom Exchange Foreshore on Lower Long Street, The Vogue on Buitengracht Street, 27 Lower Long Street and Beaufort House on Jack Craig Street. There are seven other developments currently under construction.

This is a significant improvement from a few years ago. The SCCR reveals that the value of property in the city centre soared by nearly 40%, from R30.6 billion in 2016/2017 to R42.8 billion in 2018/2019, with 39 new developments worth over R13.5 billion in the pipeline.

A resilient central city post-Covid-19

However, 2020 is a year unlike any other – the Covid-19 pandemic has caused unprecedented devastation globally. It remains to be seen how the city’s economy will fare. In his write-up in the report, Cape Town Mayor Dan Plato is confident that the city’s residents will “bounce back”, while Western Cape Premier Alan Winde called the city the “responsive engine room of the economy”, stating his assurance that it would “lead the way as cities face this challenge and adapt to new ways of doing business”.

Read: Why I sold my investment properties

Wesgro CEO Tim Harris says the pandemic has brought unprecedented opportunities which spur innovation, transformation and best practice.

“We have seen how local businesses are pioneering new ways of doing things: building resilience now, as well as for the future.”

Wesgro, together with the Western Cape Government and City of Cape Town, has adopted a three-pronged approach to the pandemic: response, adaptation and recovery.

Chief economist at Sanlam investments Arthur Kamp acknowledges that the “global devastation” has damaged the city’s economy. But he says the economic performance of what is arguably South Africa’s most successful CBD means it is well-placed to navigate a path to recovery.

Kamp adds that since the pandemic led to travel restrictions Cape Town should now work on reviving its tourism sector.

“Once Covid-19 passes, pent-up demand should unleash a wave of foreign visitors.”

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From your lips to gods ears!
But only if something can be done for the homeless who are flooding the city and Atlantic seaboard with plastic shelters on the Pavements and public places….this is a travesty of note, not only for the disenfranchised but for the weary rate and tax payer too.

Somebody in cape Town is clearly living in La La Land.

“pent up demand” vs land expropriation….

Let’s hope so. I do think Cape Town’s very high profile on the global tourism stage is good for SA in general. Seems to generate more affinity for us as a country and our prospects – perhaps more than is warranted.
Nevertheless, it felt like pre-COVID there was already an oversupply of capacity in parts of the market which was already leading to reducing prices from 2018 in places like the Atlantic Seaboard. In a recent report I see Cape Town has about 4,500 airbnb type rentals available vs. about 14,500 in London so we are coming off quite a high base. Also, there is an overhang of new stock in the CBD and will be for a while with Harbour Arch etc. still in development.
Also, student accommodation seems to have a particularly big glut in Obs, Rondebosch etc. possibly due to big student accommodation focused businesses coming to market lately.
Anecdotally it also felt like visitors were becoming more concerned about crime. That could be a major factor going forward with higher unemployment post COVID.

I doubt there will be a (foreign) tourist season – not showing in hotel bookings at all. But, I doubt the locals that used to go overseas will be going anywhere either in anything like the past volumes. Besides being wary of virus and ever-changing rules, flight costs are extreme.

So maybe we see lots of local? Many venues will need to drop prices.

Sounds good. The season will,obvously, be restricted, but some is better than nothing. Enjoy.

End of comments.

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