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JLL, the world's leading real estate investment and advisory firm, today released its second quarter (Q2 2015) Cairo Real Estate Market Overview report that assesses the latest trends in the office, residential, retail and hotel sectors.
Ayman Sami, Head of Egypt Office at JLL MENA, commented: "All sectors of the Cairo real estate market have continued to exhibit positive performance and improved sentiment during Q2 2015. We have seen more investment coming from Saudi Arabia and the United Arab Emirates since the Egypt Economic Development Conference which was hosted in Sharm El-Sheikh in March of this year. This has resulted in the International Monetary Fund upgrading its forecasts for Egypt for 2015 and 2016, with GDP growth forecasts raised to 4% in 2015 and 4.4% in 2016. "
He added: "Within the residential sector prices are expected to continue to rise in New Cairo, on the back of major new announcements (New Capital Cairo, Future City, Palm Hills and MNHD joint venture) and government initiatives to further develop the suburbs of East Cairo. The same cannot be said of projects to the west of the City that are unlikely to see such strong price growth.
With over 770,000 sq m of retail floor space scheduled to be completed over the next 18 months, we expect vacancy rates to increase from their current levels, limiting the prospects for further rental growth. "
He continued: "With the government recognising the importance of the tourism industry to the Egyptian economy, the Ministry of Civil Aviation plans to reduce aviation fees at four airports (Luxor, Aswan, Marsa Matrouh and Taba and the Ministry of Tourism embarking on a major overseas marketing campaign, , we anticipate the hotel sector will see some gains.
The level of Cairo's office supply remained unchanged in Q2. Office rents in Central Cairo witnessed a significant decrease, falling to USD 30 per sq m per month as the majority of demand shifts towards satellite cities, especially in New Cairo. The success of 'New Cairo' is reflected in strong rental growth in Sector 2 over the past year, which can be largely attributed to the availability of better infrastructure, accessibility and parking. Rents in the major suburban markets of New Cairo and West Cairo remained unchanged over the quarter."
SECTOR SUMMARY HIGHLIGHTS – CAIRO:
Office: Cairo's office supply remained unchanged at 919,000 sq m GLA as of Q2. While vacancy rates have trended up over the past year, they have remained relatively stable over the quarter at 33%. Office rents in Central Cairo witnessed a significant decrease in Q2, falling to USD 30 per sq m per month, as the majority of demand shifts towards satellite cities, especially New Cairo. Rents in the major suburban markets of New Cairo and West Cairo remain unchanged over the quarter. The stand out performer over the past year has been New Cairo (Sector 2), where rents have increased by 22% compared to Q2 2014. Since sector 1 started to become more congested, demand is shifting to sector 2 and 3 given their competitive pricing and the availability of parking space.
Residential: Four developments were completed across the residential market, adding an extra 2,000 units to the residential supply in Q2. Those developments included Jiwar and the Palm Hills Extension, Rehab 2 and Village Gardens Katameya in New Cairo. An additional 28,000 units are due for completion during the second half of 2015, the majority of which are located in 6th of October, however many of these projects are likely to be delayed into 2016 and 2017.
Retail: Vacancy rates in existing retail malls remained largely unchanged on a quarterly basis but have recorded a significant decline over the year as the market absorbed much of the 40,000 sq m of GLA completed over the past year. The decline in vacancies has resulted in continued rental growth, with prime rents for line stores increasing by 5% over the quarter and by 13% Y-o-Y. No retail malls were completed in Q2, with Bandar Mall and Capital Mall now scheduled to complete in Q4 2015, and Madinaty Mega Mall and Citadel Plaza postponed until 2016.
Hotels: No new hotels were delivered in Q2 as the reopening of the Nile Ritz Carlton (331 keys) is now scheduled for September, followed by the St. Regis Cairo (292 keys) later in 2015. Hotel occupancy rates have been fluctuating in Cairo since 2013. The 55% occupancy recorded in the year to May 2015 represents a significant increase from the 38% recorded in the same period last year The financial performance of Cairo hotels has increased less rapidly than the occupancy rate, with the average daily rate (ADR) in the year to May increasing by just 3% from that witnessed during the same period in 2014.
Cairo prime rental clock
This diagram illustrates where JLL estimates each prime market is within its individual rental cycle at the end of the relevant quarter.
*Hotel clock reflects the movement of RevPAR.
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