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News Release

Cairo

Fast-tracking new investment law will stimulate Egyptian economic performance

JLL Q2 Cairo report says the adoption of new law will attract investment into  real estate and other sectors


The Egyptian government's approval of a new investment law will pave the way for a stimulated business environment that will improve market conditions, according to JLL's Q2 Cairo Real Estate Market Overview.

The Egyptian government is aiming to fast-track the adoption of a new investment law in an attempt to improve the investment environment in Egypt.

"This new law should increase investor confidence, encouraging the recommencement of some projects that are currently on hold and will create new development opportunities," says Ayman Sami, Country Head of Egypt, JLL.

The law will aim to attract investment into real estate and other sectors by removing long standing bureaucratic obstacles. Among the proposed changes are relaxations on foreign ownership, tax windows, and the easing of the current restrictions on the repatriation of capital. 

JLL's report revealed that Q2 continued to witness the impact of the recent devaluation of the Egyptian Pound, as consumers and suppliers changed behaviour in an attempt to adjust to market conditions. 

"Most sectors of the Cairo real estate market are now approaching the final stages of decline resulting from the devaluation and the subsequent economic turbulence," said Mr. Ayman.

The hotel sector is the only sector currently in the 'upturn stage' of its market cycle as the currency devaluation has made Egypt a more affordable destination for foreign visitors. Domestic tourism is also increasing, with local citizens contributing to the recovery of occupancies experienced over the past year.

Sector summary highlights – Cairo

Office

Hot Topic

The office sector has seen reduced demand following the financial burden being transferred to occupiers on the back of the Egyptian Pound devaluation.

Al Futtaim Group Real Estate's'Podium' which comprises six buildings, has entered the pre-launch marketing phase. The project is expected to be adding 35,000 sq m of small and medium sized office space in the northern business district of the Cairo Festival City project.

Supply

Cairo's grade A office supply remained stable at 958,000 sq m, with no new space completed in Q2.   Most of the upcoming new supply is located in New Cairo with upcoming completions in this area including 60,000 sq m of office space in Festival City's business district along the south road 90, scheduled for delivery in Q3.

Performance

The effects of the devaluation continued to be felt in the office market throughout Q2, shifting negotiating power further in favour of occupiers.

Vacancy levels have remained stable during Q2, but are expected to increase with additional stock being added to the market later in the year.

Banks continue to be the most active occupiers, as they look to increase their coverage and market share given the improved performance of the banking sector. Oil & Gas occupiers are expected to become more active in the second half of 2017, on the back of more aggressive expansion plans.

Residential

Hot Topic

Continued confidence towards the residential market has resulted in a number of developers announcing new projects or further stages of existing projects across Cairo. This has included Palm Hills Developments, which is expanding its integrated residential community in West Cairo, and Mostakbal City (located close to the New Capital City), which has commenced site preparation and utility works  with full coverage expected by 2019.

Supply

There were no new additions to supply within gated residential communities in Q2 2017, but construction continues on previously announced projects. The majority of the 33,000 units scheduled for delivery over the next 3 years are located in New Cairo although a number of new projects have been announced in 6th of October in Q2 including Mountain View's iCity October and Porto's Porto October.

Performance

Sale prices have generally increased over Q2 in USD terms, as the market begins to stabilise following the sharp decline in prices in USD terms on the back of the recent devaluation of the EGP.  Residential sale prices increased around 30% in EGP terms during Q1 and this trend has continued into Q2 due to strong local and expatriate demand.

Retail 

Hot Topic

An increased number of residential projects are seeking to add retail and entertainment components. As demand preferences have shifted towards integrated communities, more residents are seeking local retail, networking and entertainment facilities within close proximity of their homes in line with their fast paced lifestyles.

Badr El Din real estate has introduced 'Mazar Mall' which adds a total of 20,000 sq m of retail space within Sheikh Zayed City.

Supply  

Following the opening of Mall of Egypt in Q1 (165,000 sq m), there were no significant additions to the retail sector in Q2, leaving the supply at 1.46 million sq m of GLA. Construction work continues on a number of major projects including Majid Al Futtaim's Almaza City Center (103, 000 sq m).

Performance

The retail sector has been negatively affected by recent economic conditions, specifically the devaluation of the EGP and continued import restrictions. These changes have forced developers and international retailers to simultaneously reform their operations and requirements, while local retailers and value brands have seized the opportunity to expand.

Hotel

Hot Topic

After several years of political turmoil and security issues, the Cairo hotel market has shown signs of recovery in the first half of the year.  This has been aided by the return of European visitors and stronger demand from domestic and regional markets as Egypt has become a more affordable destination following the devaluation of the pound. Tourism promotion campaigns initiated in 2016 in different target markets have helped promote a positive image of the country, as have the lifting of travel bans, resulting in increased visitornumbers over the first half of the year.

The Grand Egyptian Museum will open in mid-2018. The Antiquities Minister has announced this project (that will house over 100,000 artefacts spanning different pharaonic periods), as part of its strategy to promote the historic and cultural tourism sector. The Ministry has also announced plans to restore and reopen a number of museums across several governorates.

Supply

 No completions took place during the second quarter of the year with the total hotel rooms stock remaining at approximately 22,500 rooms.

Performance

Stronger demand has resulted in occupancy rates growing from 60.5% last year to 67.5% YT May 2017 as Egypt has become a more competitive destination.

Demand from domestic tourists has picked up substantially in light of the reduced affordability of Egyptian citizens to travel abroad. The Ministry of Tourism continues to promote domestic travel, by supporting local investment in the hospitality and leisure developments through advertising campaigns.

-Ends-