Cape Town will brace itself for the emergence of apartment developments, as JSE-listed property counters make their foray into the residential sector to diversify their exposure.
Many apartment developments have been largely concentrated in Johannesburg, but Cape Town has also attracted a piece of the residential investment pie.
The largest listed property company Growthpoint Properties is rolling out the investment, as it announced the completion of its residential rental complex, The Breakwater opposite Victoria & Alfred (V&A) Waterfront.
Growthpoint CEO Norbert Sasse says 150 residential apartments have been released into the market and are already showing strong demand. Growthpoint owns 50% of the mixed-use V&A Waterfront precinct, together with the Public Investment Corporation.
The complex features units which range from 30 to 120 square metres for studio, one and two bedroom apartments.
Rentals start at R7 000 per month for a studio apartment, while one bedroom, one bathroom units start at R13 000 per month, and from R18 000 per month for a two bedroom, two bathroom apartment. The apartment complex will cater for those wanting a live, work and play lifestyle.
The complex is part of Growthpoint’s R459 million investment to develop the V&A Waterfront’s retail, office and residential offering of the precinct.
The Breakwater follows Growthpoint’s redevelopment of Allan Gray’s old building into its first long-term residential rental complex called Ports Edge over a year ago. Sasse says Ports Edge is now over 95% let.
Another property counter which is investigating apartment opportunities in Cape Town is Tower Properties (Tower).
The company in February announced that it will look for residential opportunities at its 20 327 square metre flagship mixed-use asset Cape Quarter precinct in Cape Town.
Tower CEO Mark Edwards says the company is looking at pockets of spaces in its portfolio that is underdeveloped space for residential units. “We have a lot of that at Cape Quarter,” Edwards explains.
The company has conducted financial feasibility studies on redeveloping portions of the Cape Quarter precinct to accommodate residential apartments.
Edwards says the precinct is already showing a strong demand for residential units, given its mixed-use nature with 50% of commercial and another 50% of retail space already firmly entrenched.
Apartment opportunities come at a time where South Africa’s residential property market is characterised by the shortage of stock while demand continues to grow.
The year 2015 is set to see more property companies announce more residential opportunities in a bid to diversify from the retail, office and industrial sector – which are arguably facing challenges.
Head of listed property funds at Stanlib Keillen Ndlovu in a research note said diversification will be a theme for the listed property sector. “Residential exposure is starting to pick up, and there are talks of a couple of funds looking to create a 100% residential focused fund,” says Ndlovu.
Industry players estimate that there is a strong case for residential property investments, given that the local listed market has a residential representation of roughly 1%, while the United States boasts more than 10%.