By Ian Fife

Young IT entrepreneurs, professionals and other "cultural creatives" are driving a fresh commercial property boom in the Cape Town CBD as the conversion of offices to flats comes to an end.

They have bought up and are renovating practically every small property in the CBD.  "Right now there is not a single central city block without at least one building project going on," says researcher and developer Theodore Yach.

"There are no more bargains left in the city."  Jody Aufrichtig (32) agrees. He and fellow chartered accountant Nick Ferguson (34) returned from Britain eight years ago and have claimed the top end of trendy Long Street as their own. They have bought 14 properties and own some businesses in them, too. 

"Lately, we have started buying on the city's periphery because CBD properties are now so expensive that we can't get decent cash flows out of them," he says. "First-year yields on small properties without parking have dropped to 10% or less." 

Aufrichtig's competitors are lawyers, accountants, engineers, architects and quantity surveyors who are snapping up and renovating small buildings to house themselves rather than renting from landlords.  "These professionals are aesthetically conscious, unlike their staid forbears," says Yach.

"Their renovations are sensitive and the interiors stylish."  Typical, he notes, is law firm Smith Tabata Buchanan Boyes, which owns offices off St Georges Street that resemble an advertising agency. 

"These renovations are doing wonders for Cape Town's heritage and cultural life," says Andrew Boraine, CEO of the Cape Town Partnership, which matches the lobbying and advisory role of the Central Johannesburg Partnership. 

He says IT firms, "many doing international business", have inundated Cape Town and become significant contributors to the local economy.  The property owners, professionals and IT entrepreneurs signal that Cape Town is attracting "cultural creatives", highly educated people for whom quality of life is at least as important as wealth. Yach says technology allows them to work from almost anywhere and that the Cape Town CBD, "between the mountain and the sea", gives them choice and quality of life. 

They support a growing retail and service sector. "There are now 100 coffee shops in the Cape Town CBD," says Yach.  They are also buyers of the flat and loft conversions that were launched in the city in 2003. The head of Pam Golding Properties' inner-city operations, Laurie Wener, says the first and biggest group of buyers in Mutual Heights, Cartwright's Corner and Mandela Rhodes Square was made up of "professionals aged between 25 and 45 who often work from home. Most of them appear to be owner-occupiers." 

Yach, who is developing Market House on Greenmarket Square, agrees: "More than 50% of my buyers are young women professionals, the majority of them of colour and able to pay R750 000 or more for an apartment." 

Yach says the Cape Town CBD had 773 residential units before 2000, most of them produced in a five-year wave of loft conversions. The city will have added another 1 990 by the end of 2006. PGP letting chief Dexter Leite says he has 60 inner-city units on his books, a little over 10% of the 500 or so new units completed so far.

"We've let 30 so far, with two-bed units getting between R4 600 and R 6 500/month."  Wener says a second and third wave of owner-occupiers from overseas and Johannesburg followed the young professionals. "Few rent their properties out, keeping them for holiday or business use." 

But there are few new developments and the market is pausing until the current projects are finished.  Wener says young professionals have bought properties with little or no cash and have high after-tax mortgage payments. But she sees no danger yet of owners forced being to sell because they are unable to cover their home loan instalments as a result of low rents or poor income.

"In any case, prices seem to be settling at between R10 000 and R14 000/m², which gives most early buyers of R750 000 units a R200 000 profit cushion."  Boraine says the current 50 000 residential population of the CBD and surrounding City Bowl is too small and must grow to 150 000 to make the inner-city retail and entertainment infrastructure sustainable. And Yach says building up the retail component is the next task of the Cape Town Partnership. 

But their job is easier than those in the Johannesburg and Durban CBDs. Yach says the Cape Town CBD fits 14 times into the Johannesburg CBD and has a single city improvement district with four precincts to co-ordinate. Its renaissance is probably 10 years ahead of Johannesburg.  "But I envy Johannesburg's local authority, whose clear inner-city focus has captured the imagination of its people," he adds. "In that way they're light years ahead of us."