More businesses are semigrating to Cape Town

 ·18 Feb 2023

Cape Town is seeing a boom in business semigration as businesses look for reliable service delivery.

Brent Townes, Commercial Property Chief Operating Officer for Lew Geffen Sotheby’s International Realty, said that semigration is not only driving the relocation of families but also businesses as Cape Town sees increased demand for business premises.

Townes looked at an FNB report which dealt with key drivers for sales and movements in the South African commercial property market.

“According to the report, the primary reason for moving premises in the fourth quarter of 2022 was financial constraints (31.68%) which doesn’t come as a surprise; however, what is notable is that the second most commonly cited reason was to relocate to an area with more reliable utilities and municipal services (23.10%),” Townes said.

In 2019 and 2020, the number of sellers relocating premises for better service delivery was between 9% and 12%; however, by mid-2022, the percentage spiked to 24.2% – with a marginal drop in the fourth quarter.

On a national level, moves for bigger/better premises (22.10%), closer access to markets (22.00%), better transport access (18.40%), and downscaling (3.70%) followed the need for reliable service delivery.

An Auditor-General report said that only 41 of South Africa’s 257 municipalities received clean audits, with many not spending enough on critical infrastructure maintenance.

With 22 of the 41 municipalities with clean audits being in Western Cape, Townes said that further migration of businesses to the Western Cape could be expected.

In addition, Cape Town’s lessened load shedding is also attractive for businesses.

“Cape Town not only has a high service delivery rating, but it also experiences less loadshedding than the rest of the country and, with the local government on track with their scheme for commercial property owners to supply own solar-generated power back to the local grid,” Townes said.

Cape Town experiences less load shedding due to the production of hydroelectricity at the Steenbras Dam.

The electricity outlook also looks positive, with the implementation of tax breaks on solar and Koeberg being brought back online in the next twelve months.

Moreover, the motivation to sell due to financial pressures is lower in Cape Town compared to inland metros – 19.9% as opposed to the low 30%s of upcountry cities.

Cape Town also sees moving for better or bigger premises and improved transport access as two of the main motivations for selling.

However, businesses looking to upgrade their premises in sought-after central areas or for transport logistics face a large problem – there is little stock available as owner-occupier buildings are usually tightly held.

There is also no available space for development in and around the city. For exports, the airport and harbour are also already congested.

“This has led to new development on the Northern and Western Suburbs, which is ongoing with rapid expansion on the N7 logistics corridor and as far up the coast as Saldanha, where South Africa’s first free port is being developed,” Townes said.

The desire to move for improved service delivery is ranked fifth place for Cape Town – it is ranked second on a national level, meaning that businesses in Cape Town feel they have greater access to services.

Read: Good news for Cape Town property owners

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