2013-12-02 13:00:43 - Recently published research from Business Monitor International, "Egypt Real Estate Report Q1 2014", is now available at Fast Market Research
We believe that the real estate sector in Egypt will continue to stagnate in the face of a depressed economy and continuing political unrest. However, we have predicted a rise in rental rates in Cairo, New Cairo, and 6th of October City due to a lack of new supply to cover slightly increasing demand, especially for space in safer suburbs. Future political upheaval may continue to negatively affect all sectors, but specifically Cairo and Giza as businesses flee to the safety of the outskirts.
In spite of Egypt's long-term potential, the country continues to be susceptible to instability and will be characterised by the aftershocks of the Arab Spring in the short-to-medium term. We see little prospect for a swift economic
recovery in Egypt. Although we remain bullish in the long term, our most recent data continue to reveal the tangible effects of Egypt's uneasy political transition on the commercial real estate market, with retail space suffering particularly from the country's volatility due to its dependence on tourism.
Full Report Details at
The Egyptian economy is stuck in a rut, from which it does not appear likely to escape anytime soon. What is needs most - namely an end to frequent outbursts in violent unrest, and greater clarity on the medium-term policy trajectory - are those for which we are the least optimistic on in the near term. Much is often said about the need to sign a long-awaited IMF Stand-By Arrangement, which would certainly help by providing a key source of external financial assistance and forcing necessary structural economic reforms. The more volatile Egypt becomes, the slower its economy will recover from both the Economic Crisis as well as its multiple coups, and the less FDI will come in as investors move on to more stable nations. Egypt currently has a decent supply of office stock, mainly utilized by the energy and banking sectors. While supply is slowly increasing, the political events within Egypt are complicating things by increasing the demand for more secure spaces often on the outskirts of Greater Cairo (such as in New Cairo or 6th of October City.) Congestion and a lack of parking is also pushing large multi-national corporations out of urban Cairo and towards the suburbs. The situation is the same in Giza, which is seen more and more as an unstable and unsafe location prone to overcrowding.
Egypt's retail sector is dependent on the tourism industry, typically one of Egypt's strengths given the cultural and historic interest in their country. As Egypt becomes more unstable, however, the less tourism they will have. The country has its fair share of luxury shopping centres and boutiques, but all of this will be wasted if they cannot make people feel safe about visiting. Further projects will be delivered in 2014 and 2015, expanding the available space significantly and lowering rents as the vacancy rate increases.
The industrial real estate sector has perhaps suffered most of all due to the political events in Egypt. The sector parallels the Egyptian economy as a whole, which has not been performing well or showing much recovery of the turmoil in 2011. The government is taking steps to invest in this sector in order to turn investment numbers from negative to positive, but they will require significant FDI to make this a reality.
Once the fog of revolution has cleared, we expect a young and growing population to support a strong construction and infrastructure growth between 2013 and 2017. However, with the above in mind, we highlight that the sheer breadth of projects currently under consideration will require a huge investment drive, and will be almost wholly reliant on foreign direct investment (FDI). As such, considering the current events in Egypt, we predict further stagnation of the real estate sector with sporadic increases in certain cities.
* The country's real estate market as a whole has been seeing strong growth, despite political instability. Residential asking prices in New Cairo rose by 4% and 9% quarter-on-quarter for apartments and villas respectively.
* On 3 July, 2013, the Egyptian army chief General Abdul Fatah al-Sisi removed President Mohammad Morsi from power and suspended the Egyptian constitution.
* On 14 August, 2013, the military government imposed a State of Emergency over the entire country, giving them authority to arrest and detain people at will in select cities.
Key BMI Forecasts:
* Office rents will increase in Cairo (5-10%), New Cairo (5-10%), and 6th of October City (2%), while decreasing in Giza (5-10%).
* Retail rents will increase in New Cairo by 3%.
* Industrial rents will remain stable in Cairo, New Cairo, Giza, and 6th of October City.
* Net Yields will remain stable in all cities and sectors in 2014
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