Cape Town office
Cape Town skyline (Image: Ryan Warneke)
  • South Africa's business districts have been battered by the Covid-19 pandemic, with office occupancy rates reaching record lows.
  • Cape Town's inner-city hasn't been spared from the exodus, as consecutive Covid-19 waves continue work-from-home trends.
  • But the Mother City is doing better than Johannesburg's primary business hub, Sandton.
  • Around 16% of office space in Cape Town's CBD was vacant in the second quarter of 2021, compared to more than 20% of offices in Sandton.
  • For more stories go to www.BusinessInsider.co.za.

Office spaces in South Africa are still recording dismally high vacancy rates, as consecutive waves of Covid-19 continue the work-from-home trend and force companies to revaluate their leases. This is particularly true for Johannesburg's primary business node of Sandton.

The Covid-19 pandemic has turned the commercial property sector on its head. In addition to the fierce economic challenges brought about by coronavirus-related lockdowns, empty office floors are ghostly examples of changes in the way people work.

Office vacancy rates rose to 13.3% at the end of 2020, according to the South African Property Owners Association (Sapoa). But it reached new highs in the first half of 2021, and, by the second quarter, had increased to around 15%, its highest level since 2004.

Cape Town's CBD, although more resilient to the uptick in national vacancies prior to the pandemic, was still seriously impacted by Covid-19. By the end of 2020, vacancy rates topped 14.6% compared to just 10.8% during the same period in 2019.

Office vacancies in Cape Town's inner city increased to 16.2% by the second quarter of 2021, at levels last seen in 2013. This was revealed during the latest report on the Cape Town Central City Improvement District (CCID), which covers an area of 1.6 square-kilometres, encompassing more than a million square-metres of office space.

This is comparable to Johannesburg's business node of Sandton, which, by the second quarter of 2021, recorded some of the highest vacancy rates in the country. More than 20% of all of offices in the area have been recorded as vacant, compared to 17% during the same period in 2020, with at least one major commercial property group reporting vacancy rates of up to 25%.

Cape Town office
Commercial Property Trends (Graphic: CCID)

Premium office space – also known as P-grade – has shown the highest vacancy rates in Cape Town's CBD, due to the completion of 35 Lower Long. This project added a further 14,080 square-metres of prime office space to the market, resulting in a surge in the P-grade office vacancy.

Sandton experiences the inverse, with P-grade offices, accounting for the largest amount of stock, recording the lowest vacancy rates.

But the occupation of Sandton's premium office spaces hasn't been able to offset vacancies on a whole.

Vacancy rates in Sandton's A-grade spaces – defined by Sapoa as modern buildings not older than 15 years which have had major renovations – grew to almost 24%. By comparison, A-grade spaces in Cape Town have been the least affected, recording recent vacancy rates of 10.4% compared to 9.8% in 2019.

B-grade stock – generally older buildings, but with finishes close to modern standards as a result of refurbishments and renovation – was hammered in both areas. In Cape Town's inner city, vacancies rose from 10.7% to 16.7%. But the mass exodus in Sandton, although accounting for the least amount of stock, was much more severe, with vacancy rates peaking at almost 35% by the second quarter of 2021.  

"According to SAPOA, B-grade office space is particularly vulnerable to economic shocks given the high proportion of SMMEs in its tenant base," noted the CCID report issued on Wednesday.

And while Cape Town's CBD has been more resilient than Sandton, the latter's vacancy rates have been rising steadily over the past five years. Cape Town, on the other hand, has bucked the pre-pandemic trend, decreasing its office vacancy rate from nearly 17% at the start of 2014 to a low of around 10% in 2017.

Abandoned office spaces are being converted into residential apartments in an attempt to revitalise these struggling business nodes. Both Sandton and Cape Town's CBD are experiencing a surge in these conversions, with the latter being more successful due to higher demand for living spaces, according to the CCID.

One example of this trend in converting commercial properties into residential spaces is One Thibault which launched earlier this year. The mixed-use office and residential development valued at R500 million features apartments from the 15th floor up, while the lower levels are still reserved for commercial use.

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