Surge in Office Property Growth in Western Cape’s BPO Sector

BPO Growth in the Western Cape: Surge in Office Properties

The demand for call center facilities has prompted BPO companies to establish a presence throughout the region.

By Staff Writer

The resurgence of the Business Process Outsourcing (BPO) sector in the Western Cape has significantly boosted office commercial property occupancy in the aftermath of the pandemic.

While the COVID-19 pandemic and the trend towards remote work initially hindered commercial real estate, the establishment of call centers by international BPO operators in South Africa has revitalized office occupancy rates.

Increasing Demand for BPO Office Space

According to Catalyst Fund Managers’ bi-annual dashboard on local listed properties for early 2024, “the BPO sector has contributed to 60% of net office space absorption over the last 18-24 months in Cape Town. As available space diminishes and rental rates climb, we may see expansion into under-supplied areas such as Gauteng.”

Rode’s Report on the South African Property Market 2024:1 highlights that “the BPO industry is thriving, with at least 90,000 individuals employed in the Mother City.”

For instance, Sourcefit, a BPO firm from the Philippines, launched operations in De Waterkant in March 2024, followed by Wipro from India establishing itself in Century City in 2023.

Expansion of Call Center Space

CEO of CapeBPO, Clayton Williams, emphasized that demand remains robust, leading to the emergence of BPO hubs in Century City, Salt River, and Wynberg/Claremont, alongside the Cape Town CBD.

Williams noted that the substantial influx of employees is driving the need for office space. With approximately 10,500 individuals expected to be hired in the Western Cape in 2024, each requiring around 10m² of space, a total of 105,000m² will be necessary to accommodate these new hires.

Consequently, the BPO industry has to secure over 100,000m² of office space annually since the pandemic ended, as it has expanded by roughly 10,000 seats each year.

Challenges in Office Space Expansion

The momentum shows no signs of fading, with the sector poised to add over 11,000 jobs this year.

The Cape Town CBD is nearing capacity; however, its available buildings often do not meet the requirements for call centers.

Kevin Padayachee, COO of Investicore, pointed out that central buildings typically range from 500m² to 800m², while call centers generally need around 3,000m².

In addition to spatial constraints, BPO companies are exploring locations outside the CBD to lower commutes and transport costs for their employees.

Relocation of Call Centers Beyond the CBD

While some operators are considering establishing call centers in townships where most employees reside, both Williams and Padayachee agree that this poses challenges.

Williams remarked that such moves would necessitate a lengthy rezoning process and the development of infrastructure capable of supporting up to 1,000 people. Padayachee added that commercial risks exist, as the investment in the call center would typically only attract interest from other BPO operators.

Accessibility to amenities like restaurants, shops, and transport hubs is crucial for both staff and operators. This became evident when Investicore proposed a call center in an industrial zone, which, despite lower rental costs and shorter commute times, did not gain traction due to the lack of nearby facilities.

As the number of US operators establishing themselves in South Africa rises, the need for call centers to be near essential services will only grow. Williams noted that many of these centers would operate at night due to time differences, necessitating accommodations for staff needs.

Currently, municipalities across the country offer no incentives for setting up call centers in townships.

However, the Rode report indicated a trend of call centers opening in Diep River, Mitchells Plain, and Retreat due to high commuting costs. This shift from urban centers is also seen with UK operator Sigma Connected establishing a call center in Paarl last January.

This location, just 45 minutes from Cape Town, is expected to reduce commute times for local employees. Feedback on the setup has been positive, with employees eager to join a rapidly expanding business and sector.

In its initial phase, the center aims to create 250 jobs, with plans to expand to around 1,000 positions in the coming years.