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JLL MENA releases Q3-2012 Cairo real estate report

Returning confidence encourages hopes of increased activity across the real estate sector

JLL MENA​, the world's leading real estate investment and advisory firm, has released its third quarter (Q3) 2012 Cairo Real Estate Overview report. In summary it concludes that the Cairo real estate market is poised for recovery as investor confidence returns due to a more stable political environment after the recent presidential elections and the appointment of a new government.

Commenting on the report, Ayman Sami, Head of JLL MENA’s Egypt Office, said: 

“Egypt has always had strong long term fundamentals that make it one of the most attractive markets in the MENA region.  With a return to a more political stable environment, under a business friendly government, we are a seeing increased investor and consumer confidence.  Consequently, the Cairo and broader Egyptian real estate market is poised for recovery across all sectors.  The office and retail sectors will benefit from growth in the economy, residential sales have started to pick up as people begin to believe in the recovery and hotel sector will benefit from the authorities hard work to encourage visitors back to the country. While the improved sentiment and confidence has yet to be reflected in price or rental increases in the broader real estate market, we would expect to see  more investment and development announcements and stronger performance  over the next few months, providing that political and economic stability continues and the economy begins to pick up more quickly.”
Summary highlights, Cairo Market Overview, Q3 2012:
  • The Egyptian economy was heavily hit by the revolution of 2011, with real GDP of just 1.8% recorded last year. While the political situation has now stabilised, the economy is expected to only recover slowly, with IHS Global Insights predicting real GDP growth of 1.9% in 2012 and 2.8% in 2013.

  • Negotiations with the IMF in respect of the increased loan of USD 4.8 billion are progressing but have not yet been finalised. A recent meeting between President Mohamed Morsi, and IMF Managing Director Christine Lagarde led to a technical team visiting Cairo to finalise the details of the IMF’s financial assistance. 

  • The new government is aiming to achieve nominal growth of 4% to 5% this year. It estimates that this will require a total of USD 45 billion in investment, significantly above the agreed loans from the IMF and Qatar.

  • According to the Central Bank, Egypt’s foreign exchange reserves totalled USD 15.1 billion at the end of July, after experiencing a sharp fall earlier in the year. Qatar has contributed an amount of USD 500 million, which was largely responsible for the increase of USD 685 million reported in July. 

  • The government is studying new laws to impose fines on companies undertaking commercial activities from residential buildings. If enforced, this will increase demand for space in purpose built office premises. 

  • An indication of the returning economic confidence is that 703 new companies have started operations across Egypt in September. 

  • The Cairo Stock market has responded positively since the appointment of the new president, with Egypt’s benchmark EGX30 index increasing by 9% in September. 

  • The government is undertaking major efforts to boost tourism as this sector contributes  12% of GDP and employs 4 million workers (12.6% of the labour force) Several countries including USA, Japan and China have lifted travel bans to Egypt and the direct contribution of travel and tourism to GDP is projected to grow to USD 16.2 billion in 2012. (World Travel and Tourism Council, WTTC).

  • Expressing their confidence in the future of the Cairo real estate market, Al-Futtaim Group and Emaar Properties (two of the UAE’s largest developers) have announced plans to join forces to develop Cairo Gate, a USD 830 million retail and entertainment complex on a 16 acre site on the Cairo to Alexandria desert highway. 

  • Another indicator of increased sales activity comes from Amer Group that has recently declared real estate sales of around USD 388 million over the past 9 months. Most of these sales are from residential units in projects to be delivered to the market over the coming two years.
Craig Plumb, Head of Research at JLL MENA​ in MENA commented on the Q3 2012 report:
“Egypt appears to be on track for a return to more robust economic growth.  It is evident that the new Government is pro-investment and will be working hard to encourage a more dynamic market environment. While the political situation remains fragile and some caution inevitably remains, we would anticipate increased demand across the Cairo market over the next 12 months, providing the Government can maintain political and economic stability."