Cape Town - The city’s CBD could be dying slowly as the commercial property rentals sector experiences a decline owing to people working from home as a result of the Covid-19 pandemic.
According to The Business Exchange (TBE) chief executive, David Seinker, the property sector before Covid-19 was under severe pressure and this was exacerbated by the pandemic.
“You can attribute it to the poor trading climate. But what we are seeing is small and large businesses feeling the pinch and closing shop. This is forcing landlords to find new tenants, which is most likely not going to happen during a global pandemic.
“But there’s a shift and many businesses will see that employees can work from home and are able to work remotely, which causes companies to downsize and to reduce cost,” he said.
TBE provides serviced office spaces to companies.
Seinker said the more commercial properties lay dormant, the less valuable they became.
“It’s difficult for landlords to fill those vacancies. Once you have more vacancies, the more the property value drops – which then forces the landlords to drop prices. This adds pressure to landlords to seek investors because investors pull out because of the weak economic climate,” he said.
According to the Cape Town Central Improvement District (CCID), the CBD comprises 80% commercial property. Seinker said transforming the commercial property spaces into residential ones could be a saving grace in the long term.
“One thing Covid-19 has done is kill the conventional office lease.”
Rob Vanlierde, of Robshaw Property Group, said: “Businesses are closing down because they can no longer afford to operate.
“Hair salons and restaurants have been particularly hit hard so that’s a lot of commercial office space that’s available.
“If you convert all that to residential, you aren’t going to save residential leases – it will put more pressure on residential rentals, because you’re going to have more supply of residential properties.
“At the moment, we’re seeing a lot of hospitality companies not working and the students are not in university, so there’s an oversupply of residential properties. It will exacerbate the oversupply. The upside will be that rent will be less, but for landlords it will (be difficult).”
CCID chief executive Tasso Evangelinos said: “The CBD property market has not decreased in value at this point. Cape Town as an investment option has a rock-solid foundation and we are a sought-after business destination.”
South African Property Owners Association chief executive Neil Gopal said they were concerned about the significant decline in commercial properties being utilised.
“We are likely to see bankruptcies of certain businesses, which will impact on the office environment. We also foresee the advent of touchless technology and other health-related programmes Also, with social distancing measures, the need for more office space,” he said.
A recent nationwide survey of 80 000 tenants found that the majority were struggling to pay their rent.
Only 37% of tenants could afford to pay their full rent while 22% could not afford it at all. It also found that 11% have been threatened with legal action and 8% of landlords attempted to evict tenants.
Cape Argus