Positive Growth in Egypt's Real Estate

Egypt is planning to partially privatise 32 state-owned companies by March 2024, in an effort to attract additional FDI

According to a recent report by JLL on Egypt's real estate market, the country's real estate market remains resilient, supported by a record inflow of foreign direct investment (FDI) and substantial backing from regional developers. The report highlighted the Egyptian government's efforts to support tourism through enhanced connectivity and infrastructure, as well as the announcement of a 5-year visa for 180 nationalities, which resulted in a 34% increase in tourist arrivals in the first two months of 2023. This, in turn, led to a 19% and 40% increase in average daily rates (ADR's) and revenue per available room (RevPar's) respectively, reaching USD 135 and USD 100 during the same period.

Although the residential sector saw an expansion, with the delivery of around 4,000 units in Q1 2023 and a projected completion of over 29,000 units during the remaining months of the year, delays in project completion may be expected due to hikes in construction costs. Despite curbed demand, annual sale prices across both 6th October and New Cairo increased by 25% on average, while the rental market continued to accelerate, resulting in an 11% and 8% increase in rents in 6th October and New Cairo respectively.

In terms of the office sector, the report noted a delivery of around 21,000 sq. m. of office gross leasable area (GLA), bringing the total office stock to around 1.9 million sq. m. Another 310,000 sq. m. of office floorspace is expected to be completed during the following nine months of the year. Although the market-wide vacancy rate increased to 13% in Q1 2023, activity from multinationals and new market entrants remained weak, with call centers driving the majority of demand for smaller grade B office units.

The retail sector saw growth, with around 19,000 square meters of retail space completed in Q1 2023 and an expected completion of about 195,000 sq. m. of retail GLA during the remaining part of the year. However, a number of retail projects were suspended or postponed due to the increase in construction prices and the challenge of leasing retail spaces in a market with a high concentration of malls within a small catchment area. Demand and footfall in regional and super-regional malls were low last quarter, while strip retail and community centers performed slightly better.

In the hospitality sector, the report noted the stability of the existing hotel stock at 28,000 keys in the capital, with around 900 keys expected to be completed during the next nine months of the year. Hilton Worldwide is set to open two hotels in Cairo, including the first "Waldorf Astoria" luxury brand in Egypt in Heliopolis this year. This is part of Hilton's plans to almost double its project portfolio in Egypt over the next 3 to 5 years, indicating that major operators view the country's hospitality sector as an investment opportunity.

To read the full report, click here.