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EGYPT – investor confidence returns

1 December 2014

The year 2014 in Egypt started off with some turbulence on the political front which had a direct negative effect on investor confidence, according to Ayman Sami, Country Head, JLL Egypt.

“Despite that, we witnessed an aggressive growth plan from UAE developers, most notably Majid Al Futtaim who announced that they are planning to invest EGP 16.5 billion [USD 2.3 billion] over the next five years. Their immediate focus is to push ahead with the development of Mall of Egypt and the extension of Maadi City Centre,” Sami commented.

According to JLL, in general rental rates have remained subdued across all of Cairo’s real estate sectors. Office and residential demand continued to remain strong while retail was mainly focusing on F&B. Hotel occupancy rates remained lower than a year before in Cairo, however the ADRs are now significantly higher, Sami said.

“The presidential elections in the second quarter this year, whereby President El Sisi won with a swooping majority vote, were yet another step towards political stability. Following his election the government put into effect the reduction of subsidies on fuel which was another step towards improving the economy.

“With more control over the political and economic situation we started to see this as the first step towards improving investor confidence. At the local level, the issuance of the Suez Canal Certificate and the unprecedented demand to buy the certificates was another strong sign that investor confidence has started improve dramatically, especially when it comes to longer term investments,” Sami commented.

According to JLL research, Q3 2014 saw a relatively flat performance for office rentals and a slight reduction in retail vacancy rates and rental rates over 2013.

However, there was a significant growth in residential selling prices over 2013 with villas showing up to a 28 percent increase in price. Hotels showed a significant improvement in ADRs and rose from USD 50 to USD 103.

OUTLOOK FOR 2015

With political stability having returned to Egypt, JLL consider all of Cairo’s sectors to be promising, however developers need to focus on providing the right product with the right positioning.

“I believe that the outlook for 2015 is positive with regards to performance across all sectors. The Suez Canal Project will remain as a driver for growth around the canal cities and the government will focus on a series of reforms to further improve investor confidence,” Ayman Sami said.

“The main challenges will be the availability of suitable land plots for development, as well as the availability of infrastructure and utilities,” the JLL expert commented on a final note.

Egypt 2014 highlights

  • Political stability returned with the election of President El Sisi in Q2
  • Economic recovery and positive sentiment is reflected in the announcement of the ambitious Suez Canal Regional Development Project
  • Office developers continue to offer new products and solutions to attract occupiers that were previously discouraged by the poor quality options available
  • Despite the ongoing delays in the delivery of residential projects, some developers remain active in the market, such as SODIC
  • With two new deliveries, the retail market in Cairo is poised for future growth and development
  • Egypt’s tourism industry continues to see overall improvement with a revival in visitor numbers in certain markets

 

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