Executive rentals in Cape Town CBD in demand

01 December 2014

With the slight upturn in the economy and easier access to capital finance from banks, Knight Frank’s Atlantic Seaboard branch, which has an executive and villa rental division, is seeing an increasing number of purchasers looking for investment properties with a view to renting them out on short term lets in Cape Town, said Lanice Steward, managing director of Knight Frank Residential SA.

“Whereas in the past it was almost a given that investors would be looking for long term rentals, there are more and more investors realising the benefit of offering short term lets,” she said. “This is due to the high cost and lack of availability in some areas of hotel accommodation, and the better flexibility that self-catering affords.”

In addition to the obvious interest in investment properties in the traditional holiday areas on the Atlantic Seaboard, more and more people are realising the benefit of a CBD investment, catering to travelling businesspeople, said Steward.

A well-equipped, fully furnished two bedroom apartment aimed at executives in Cape Town’s CBD on a short term let could fetch approximately R4 000 per night at present, she said.

A typical example of a good investment right now, particularly to rent out to executives, said Steward, is a two bedroom (with en suite bathrooms) 180m² apartment in De Waterkant, selling for R4 995 000. This apartment has its own large wraparound terrace, an open plan kitchen, dining and lounge area, scullery, guest cloakroom, two secure parking bays and has such extras in the complex as a swimming pool, braai facilities, 24 hour security and Wifi. This apartment is fitted with built-in Mielé appliances and is fully furnished with stylish contemporary pieces.  

With a traditional long term rental here, the return on investment would be around 6 to 8% per annum, but the return with short term lets (with the above rental mentioned per night) could be approximately 12 to 14% with only part occupancy, she said, and this amount is, hypothetically, with only 170 days occupation per year. The advantage with this type of rental is that the rates do not fluctuate with the seasons as holiday rental rates do.

Investing in an area that is not traditionally seen as a holiday precinct, said Steward, could be more advantageous because the cost per square metre in some instances is less. Executive rentals are different to holiday rentals in that they should be close to business centres or close to bus routes and conference or meeting facilities. In most rentals such as these the rent is paid by the company and not the tenant himself and he is more likely to be there purely for work purposes.

“What would be needed to be able to get good short term executive rentals,” she said, “are good finishes, upmarket appliances and furniture (not top of the range but stylish and of a high quality), a Wi-Fi connection, laundry services, perhaps a food shopping or concierge service, and an agent who could take care of the maintenance of the property. At Knight Frank the majority of the owners we have on our books use the full service package we offer, which is full management and maintenance as well as arranging all subsidiary services via our list of service providers contracted in.”