Profit waves at Waterfront

V&A Waterfront

The V&A Waterfront – arguably South Africa’s most iconic mixed use precinct – defied the dour economic conditions to increase net property income 11% to R657 million in the year to end June.

This was disclosed in the annual financial statements of 50% shareholder Growthpoint, which reported a solid demand for retail space with renewal growth of 3.7%.

Growthpoint said the V&A showed retail sales and density growth for the first six months of 2019 of 4.5% with footfall stable at 26 million.

There was also strong demand for P-grade office space with vacancies low at 1.8% compared with the Cape Town CBD benchmark at 11.3%.

Growthpoint highlighted positive renewal growth of 5.2% with the Dock Road Junction fully let to Spaces and the new flagship Apple Store.

Growthpoint believed 1 200 parking bays at Battery Parkade would facilitate the future growth of the office sector with the 8 500 metre square head office for Deloitte progressing well.

But Growthpoint noted that turnover rental levels were lower for both hotels and retail on the back of Day Zero (Cape Town’s severe water restrictions in 2018). The residential to-let portfolio was stabilised with vacancies at 12% compared with a 15% market average.

Growthpoint reported that 2018/2019 cruise season was a good year with 66 000 passengers and a 16% increase in the number of vessels.

In this regard, the recent departure of Premier Fishing for new premises has opened a development opportunity along the quayside.

Growthpoint said the cruise liner terminal phase three development would include a food incubator offering coupled with industrial style office in 2021.

On the hotel side, Growthpoint said V&A properties maintained their premiums compared to Cape Town CBD hotels. Occupancy and average room rates reverted back to 2017/2018 levels post the water crisis.

But Growthpoint cautioned that crime and violence in South Africa were not supportive of tourism.

Looking ahead, Growthpoint said recent development had at the V&A had focused on bulking up the Canal District and prioritising the Pierhead District. “The Granger Bay masterplan is work in progress which will be the next area of focus. We will continue to look for opportunities to enhance earnings, increase bulk and densify the precinct.”

New developments at the V&A might be viewed more attentively after a recent research report confirmed the precinct’s status as an economic powerhouse.

The research report estimated that in 2018 the V&A’s contribution to direct GDP (gross domestic product) was R9.3 billion and a hefty R31.5 billion to total GDP.

The report also estimated that cumulative contribution since 2003, was R76 billion to direct GDP and R255 billion to total GDP.

The most startling statistic was that the V&A Waterfront made up 1.6% of the Western Cape economy. What’s more the precinct grew by a sprightly 13.5% real compared to the Western Cape’s growth of 0.5% and the country at 1.5%.

The study noted there had been a spectacular increase in economic activity at the V&A Waterfront – driven particularly through developments at the new Silo and Canal districts.

It was found that the recent increase in economic contribution eclipses all previous changes at the V&A Waterfront.

In the last year the largest use of the buildings was for commercial offices, which made up 25% of all gross lettable area. Areas dedicated to the general public are retail at 20%,

hotels 18% and eateries 5%.

The study concluded that the V&A Waterfront is no longer a retail mall, or just a place that tourists visit. “Rather it has a mixed use with offices, retail, accommodation, the ocean economy, as well as arts, culture and education.”

What is also key is that the V&A Waterfront is a growing commercial district with increasing prestige attached to firms operating from the V&A Waterfront.

The study reckoned these changes made, and would continue to make, a major contribution to the competitiveness of Cape Town.

“This is evidenced by a number of companies relocating from other areas of the province into the V&A Waterfront and, by inference, the City of Cape Town. The most notable example of this is the recent move by British American Tobacco to the V&A Waterfront.”

Other new and notable tenants include well known auditing and consulting firms PricewaterhouseCoopers and Ernst & Young.