In February, Egyptian Prime Minister Mostafa Madbouly said that 32 state-owned companies would either be listed on the Egyptian Exchange or sold to strategic investors within a year ending in Q1 2024. Egypt is planning to attract $40 billion in investments by 2026.
"The anticipated FDI inflow is fuelling optimism and is expected to relieve pressure on real estate activities across the country, particularly in Cairo,” said Ayman Sami, JLL country head, Egypt.
“The government’s proactive measures in the form of state support and extension of construction deadlines are aimed to ease the current challenges in the real estate sector, enabling stakeholders to navigate the economic headwinds," he added.
In February, the government decided to extend the delivery deadlines for real estate developers by 20 percent.
The government announced it would consider projects finished when they’re 85 percent complete, giving developers the chance to complete the remaining 15 percent of construction at their own pace without a delay penalty.
Optimistic forecast for Cairo's hospitality industry
Tourism inflows, increased investment in infrastructure and attractions, and the growing presence of global hotel brands signal a positive outlook for Cairo's hospitality industry. The city's existing hotel stock remained stable at 28,000 keys in Q1 2023, and an additional 900 keys are expected to be completed during the year.
Hilton plans to nearly double its project portfolio in Egypt over the next three to five years, reflecting major operators' confidence in the country's hospitality industry. This year, Hilton will open two hotels, including Cairo's first Waldorf Astoria luxury brand in Heliopolis.
Tourists are attracted by the weakening of the Egyptian pound, and the government's efforts to support tourism have led to a 34 percent increase in tourist arrivals during the first two months of 2023, the JLL report said.
Cairo's occupancy levels were registered at 74 percent in February 2023, compared to 62 percent during the same period last year. Average daily rates and revenue per available room rose by 19 percent and 40 percent, respectively, reaching $135 and $100 over the same period.
Continuous expansion of residential rental market
Around 4,000 residential units were delivered in Q1 2023, bringing the total existing stock to about 249,000 units. Over 29,000 units are expected to be completed by the end of the year, the JLL report revealed.
However, delays in project completions are expected due to increases in construction costs, which would hinder developers' timelines, the report noted, adding that some developers have decided to halt their announced projects, while new project launches were roughly muted in Q1.
Rents in 6 October city and New Cairo increased annually at a faster pace of 11 percent and eight percent, respectively, signalling strong growth in the rental market. The government's measures to support the housing market and the robust local demand are likely to boost the sector in the coming years.
Emaar Misr, in a bold move, has become the first developer in Cairo to start selling units of one of its projects at the current dollar exchange rate with a cap on exchange to hedge against rising construction costs and safeguard the continuity of its projects.
Rising demand for flexible offices
The total office stock in Cairo stands at around 1.9 million sqm following the delivery of almost 21,000 sqm of office gross leasable area (GLA) in Q1 2023. It is estimated that an additional 310,000 sqm of office floor space will be completed by the end of the year.
In the last quarter, average city-wide rents were reduced by one percent on an annual basis, recorded at $358 per sqm per annum. However, rents were high when converted to local currency due to the continued depreciation of the Egyptian pound.
Multinationals and new market entrants remained inactive in Q1, with call centres driving the majority of demand for smaller grade B office units. Consequently, the market-wide vacancy rate increased to 13 percent in Q1 2023.
Inflated rents and volatile currency situations have led more tenants to sign short-term flexible leases of fitted office units, encouraging more flexible office operators to expand in the capital.
Long-term retail rebound expected in Egypt
Egypt's large and growing population, coupled with a culture that values shopping and outings, is set to boost the retail sector in the long term.
Despite challenges such as rising construction costs and a high concentration of malls, almost 19,000 sqm of retail space werr completed in Cairo in Q1 2023, bringing the total inventory to approximately 2.9 million sqm.
Regional and super-regional malls experienced low demand and footfall last quarter, while strip retail and community centres fared slightly better due to their accessibility and the strong performance of the F&B segment.
Although average rental rates for primary malls remained stable year-over-year, secondary retail malls experienced an average growth rate of four percent. The vacancy rate also decreased slightly to nine percent in Q1 2023, down from 11 percent in Q1 2022.
Some landlords are selling less than 50 percent ownership of retail units to potential investors to generate short-term revenues and maintain control over their tenant mix. The sector is expected to see the completion of about 195,000 sqm of retail GLA by the end of 2023.