Cape Town’s CBD “shell space” offers new affordability
Cape Town’s CBD is seeing a new trend with developers marketing residential, office block converted “shells” offering affordability and appeal to the go-go lifestyle of young city professionals.
Commenting on the trend in a Cape Town interview today, Rob Stefanutto of Sotheby’s International Realty said many buyers were looking for older more reasonably priced apartments that allewed them to add finishes in their own time.
"Buying a shell for many seems to be the answer as it eliminates the gutting costs as well as the developers mark up on fittings and building materials. It is presently the most affordable way to buy property in Cape Town’s CBD which is rapidly taking on ‘suburb’ status."
Purchasers can expect to pay between R3 500 – R5000/m² for a shell and to renovate it will cost around R1 500 – R3000/m², so in total buyers are paying around R850 000 for a 140m² apartment, which is far below average. This figure is higher or lower depending on the floor and the views. Stefanutto estimates out at about R8 000m² for the finished product, which is phenomenal if you consider that property is going for anything from R12 000 – R22 000/m² in the De Waterkant area.
The company is currently marketing the Spin City building on the corner of Spin and Plain Street in town. The apartments, with good city views and direct lift access - have had a positive response from buyers.
Stefanutto says there are certain hurdles in terms of financing these properties as banks are reluctant to give 100% bonds on properties still considered commercial.
“Even if the building has residential rights, banks will only extend 70% finance. The reason for this is the property, in a commercial respect, is valued on the strength of its leases - sold as a residence, there won’t be leases in place. The way to overcome this is to negotiate a residual based on the conversion plans of unit from commercial to residential.
“It’s important to establish with the developer, as with any off-plan purchase, exactly how the shell will look once gutted and where electrical points and plumbing will be installed. Clearing of walls in old office blocks is usually a very costly process due to lack of access - you don’t want to be landed with this expense after purchase.”
Stefanutto notes that the “shell” idea was inspired by New York’s Meat Packing District conversions during the late 80s and early 90s. “Shells provide competitive rates in a growth market allowing buyers to start purchasing immediately."