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News Release

Cairo

Improved sentiment is leading to positive performance of the Cairo Real Estate Market

According to JLL’s latest Q3 2015 Real Estate Market Overview


JLL, the world's leading real estate investment and advisory firm, today released its third quarter (Q3 2015) Cairo Real Estate Market Overview report that assesses the latest trends in the office, residential, retail and hotel sectors. The report notes that there is increasing confidence and positive performance in the Cairo market as a result of the improved economic and political environment in Egypt.

Ayman Sami, Head of Egypt Office at JLL MENA, commented: "Cairo real estate market has maintained a steady performance and improved sentiment this quarter due to positivity in the overall macro environment. Constructive efforts by the government to boost the economy and investor sentiment have resulted in a 'market pull' scenario, which is attracting many developers to launch new projects. This positive environment is clearly demonstrated by the completion of major real estate projects including New Cairo and New Suez Canal. Overall, the outlook for all real estate sectors look good  in the fourth quarter of 2015 and beyond. "

He added: "With the devaluation of the Egyptian Pound, there is a marked decrease in sales prices of apartments and villas in New Cairo, which is resulting in increased transactions. This aspect along with lower rental values has infused positivity into the Cairo residential market. However, shortage of affordable housing still remains an issue but the good news is that new government initiatives are starting to address this critical gap in the market".

In this positive economic environment, there is a trend among tenants to relocate to New Cairo to take advantage of better workspace. Increased demand for efficient offices has lowered vacancy rates to 26%, and ultimately resulting in exceptional performance for the Cairo office market this quarter. Interestingly, the most significant trend during Q3 has been the return of rental growth in west Cairo for the first time in a number of years.​

He continued: "Currency devaluation is also making the Cairo hotel market more competitive as costs are becoming more attractive for tourism and leisure visitors, particularly from the dollar pegged Gulf Arab countries. This has resulted in diversion of the local tourist industry from Russia and Eastern Europe, along with a 7% year-on-year increase in tourist arrivals.

On the other hand, the Cairo Retail market continued to exhibit slow but steady growth during the third quarter. The opening of  Mirage Mall in New Cairo and the completion of a further 8,000sq m of retail within Cairo Festival City has resulted in unchanged vacancy rates in existing retail malls, but vacancies have fallen by 5% (to 17%) over the past year. A stable environment has also opened up foreign investment, particularly from Saudi Arabia and the UAE."

REPORT HIGHLIGHTS:

  • Office: Cairo's office supply reached 911,000 sq m GLA as of Q3, after completion of the Summit 75 building in New Cairo that added nearly 7,000 sq m to the current office stock. The office market has performed exceptionally well over the past quarter. The improved economic conditions and the willingness by tenants to relocate to more organized and efficient workspace has created increased demand for office buildings. As a result of this strong take up, vacancy rates have fallen in JLL's monitored basket to 26%. The strongest demand has been for space in Sector 2 of New Cairo, where rents have increased by 28% over the past year. Asking rents also continue to increase in New Cairo (sector 1) but the most significant trend during Q3 has been the return of rental growth in west Cairo for the first time in a number of years.
  • Residential: No new developments or major new phases were completed across the residential market in Q3, with only minor additions in the supply in Rehab and Cairo Festival City. The devaluation of the Egyptian Pound has resulted in a decrease in sales prices of apartments and villas in New Cairo, as well as apartments in 6th October. The only exception was for villas in 6th October, where the shortage of new supply has resulted in a modest price increase (3%), despite the currency devaluation.  The rental market has performed more strongly in New Cairo than in 6th October, where rental prices for apartments and villas both declined in USD terms in 6th October during Q3.
  • ​Retail: Q3 2015 witnessed the opening of Mirage Mall in New Cairo and the completion of a further 8,000sq m of retail within Cairo Festival City. No further projects are due to be delivered in the rest of 2015 as construction delays continue. Vacancy rates in existing retail malls remained largely unchanged over Q3, but vacancies have fallen by 5% (to 17%) over the past year. Average retail rents have followed the same pattern as vacancies.  While witnessing no change in Q3, rents have increased by 10% over the past year (since Q3 2014).​

  • Hotels: Q3 2015 saw the completion of The Nile Ritz Carlton (331 keys). The St. Regis Cairo (292 keys) which was scheduled for 2015 is now delayed till Q2 2016. While occupancy rates (53% in year to August) have decreased marginally (compared to the YT May value), they represent a significant improvement compared to the YT August 2014 (of 41%), reflecting the return of confidence and increased visitor arrivals. The financial performance of Cairo hotels has improved less rapidly than the occupancy rate, with the average daily rate (ADR) in the year to August 2015 increasing by 2% from that witnessed during the same period of 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.

Source: JLL


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