There is evidence of more clarity and increased activity in Cairo’s real estate market, with confidence returning 12 months after Egypt’s revolution, says a report.
However, with significant uncertainty still evident, much will also depend upon the country’s ability to address many of the residual challenges that are still largely unresolved, said the Jones Lang LaSalle report.
Ayman Sami, head of Jones Lang LaSalle’s Egypt Office, said: “It’s a challenging time but we are optimistic about the long term fundamentals of the Cairo real estate market. If the country is able to address its political issues then we are confident that activity will return to the market relatively quickly as demand exists across a number of sectors. We are already seeing some evidence of increased activity but continued certainty is a basic requirement for the economy to fully rebound.”
Indicators that 2012 should see a potential improvement in the Cairo real estate market, according to the report, include:
• Current and active demand for between 5,000 and 15,000 sq m of office space from a number of international FMCG and petrochemical occupiers.
• Retailers continue to open new stores with recent examples including American Eagle and Pinkberry opening their first stores in Egypt at CityStars and LC Waikiki (a Turkish retailer) opening their first store in December 2011 at Sun City Mall in Heliopolis.
• Some Real estate projects will continue towards completion in 2012. Cairo Festival City will deliver its first office phase in mid-2012 and Damac is looking to open its retail and office project opposite Dandy Mall before the end of the year. The market is witnessing a revival of other mixed use projects driven mainly by UAE and Qatari developers.
Sami said: “For the longer term investor, Egypt will always be an attractive market with considerable potential. There is opportunity in the many challenges that need to be addressed, such as more affordable housing, but the sector needs stability to be able to do this.”
Office: Currently there is about 700,000 sq m of Grade A office stock across the Cairo metro area. No new Grade A space was completed in 2011 but up to 120,000 sq m could be delivered by the end of 2012. However Jones Lang LaSalle anticipates this is more likely to only be around 60,000 sq m given the current situation with many planned projects experiencing extended delays. This will include Cairo Festival City, Mivida by Emaar Misr and Citadel Plaza by Alkan Holding. Prospective tenants are therefore seeing an improved standard of available space and greater choice. Vacancy is approximately 35 per cent but is expected to increase in 2012 given the proposed new space due to be delivered.
Average office rents peaked in 2010 at $55 per sq m per month for prime Grade A space but declined by 20 per cent in 2011 to $ 45 per sq m per month.
Retail: Total stock at the end of 2011 of mall based retail space was approximately 786,000 sq m. Major completions included Phase 1 of Mall of Arabia in Sheikh Zayed and Sun City Mall in Heliopolis which is currently 40 per cent operational. Despite delays a possible 260,000 sq m of new retail space could enter the market before the end of 2013. Cairo Festival City is not expected to be open until 2013. With the completion of other retail developments, such as a number of mixed use schemes could push the total retail floor space in Cairo to as high as 1.8 million sq m by 2014 with 29 per cent of supply comprising super regional and regional malls by 2015. This percentage is expected to increase with the completion of multiple community and regional malls.