Cape commercial property proves to be an exceptional investment

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"The surprisingly high level of interest and enquiries and the urgency of some of those looking for space," said Midgley, "indicates that our original assessment that the market had begun to turn in the last quarter of 2013 was probably correct."

This, he added, does not apply across the board. There are still some areas which have not been affected by the upswing and the new optimism. Nevertheless the popular pockets are now very much in demand and in some of these, e.g. Lansdowne, there is almost no vacant space whether the buyer/tenant is looking for office, commercial or industrial premises.

Higher level of rental returns

The increased demand, said Midgley, is spurred on not only by potential owner/occupiers but also by investors who perceive, rightly, that the level of rental returns in the commercial sector is on average three to 4% higher than that in the residential sector.

Repeating what he has said previously, Midgley said that in the entire Tygerberg Waterfront and in most of the newer parts of the Northern Suburbs (which in his franchise are serviced by Paul Abbott) as well as the Cape Town CBD and the majority of the Cape Peninsula suburbs, commercial property of all kinds has once again become a good investment - whether it be office, industrial or retail.

Asked to select some of the better propositions, Midgley pointed to the ±3,000m2 of office space now available in the Great Westerford complex on Main Road, Rondebosch (which was formerly occupied by FNB, who have now moved to the new Portside high rise building on the Cape Town Foreshore).

Also looking promising, said Midgley, is the retail space on the ground floors of the new residential complexes in Observatory.

"What characterises good propositions of this kind," said Midgley, "is that they are not only attractive in themselves but are positioned in areas which are convenient for both clients and staff as regards public transport, retail outlets, other shops, restaurants and the like."

An exterior view of the Great Westerford complex on Main Road, Rondebosch where ±3,000m2 of office space is now available.

Those signing on at Great Westerford in Rondebosch (which is a prime and popular building with excellent electrical and internet connections) will pay around R150 per m2 for spaces of 250m2 or less, while those signing for larger spaces will probably pay around R120 per m2.

Retail space in the new UCT Observatory complexes named "Obz Square" will be available at R150 per m2 - again good value, in Midgley's opinion, because the student population here is increasing all the time.

Smaller premises in greater demand

At the moment, added Midgley, landlords owning 'reasonably good' commercial properties will get a return of 8% or more per annum and are usually able to insert an escalation clause. However, he said, it has to be accepted that smaller office, retail or industrial premises, e.g. mini factories with under 250 m2, are currently in far greater demand than larger premises, and this is where the small investor should be focusing.

"The big mistake which buyers or tenants make is to not consider all their options and requirements (e.g. internet connections, parking, passing trade) in their research before making a decision. In today's market there is ample good space available and the buyer has many good options. It therefore pays to liaise with brokers such as ourselves and ensure that they compile a comprehensive list of options. With patience we have found that is usually not too difficult to meet the vast majority of criteria and still come up with a reasonable purchase or rental rate."