The signs of improvement in the Egyptian economy during the fourth quarter (Q4) of 2013 have had a positive impact on the real estate market, stated real estate investment and advisory firm Jones Lang LaSalle in its latest report.
“The more positive sentiment that has resulted in an improvement in many of the leading economic indicators in late 2013 is expected to translate into improved performance in the real estate market in 2014,”said Ayman Sami, head of the Jones Lang LaSalle Egyptian office.
“With stronger tourist arrivals and higher GDP growth, 2014 could mark the beginning of the recovery of the Cairo real estate market, providing that the progress that has been made on the political roadmap during late 2013 is continued,” Sami added.
Around 3,200 residential units were completed in Q4 2013, bringing the total yearly stock of units to 85,000 in areas monitored by Jones Lang LaSalle in New Cairo and the 6th of October.
The report highlighted that the retail market also experienced the largest surge in retail construction supply since 2011. Around 190,000 square miles of additional retail space were introduced in Q4.
“Significant levels of new supply entered the retail and residential markets as a number of major projects were completed in Q4,” according to the Cairo Real Estate Market Overview report.
“The most significant completion was the Cairo City Festival retail mall, which opened in November 2013 with the first IKEA store in Egypt,” the report added.
Rental rates for residential units have deteriorated, however. This decline was attributed to the departure of many expatriates from the country due to the political unrest.
The report noted that the “very low” room rates at hotels located in Cairo also attracted Arab families, who had previously rented homes.
Retail rents have declined by 8% over the past quarter. The study pointed out that landlords have been “considerate” with rent prices.
“Retailers continue to seek rent reductions as a hedge against these uncertainties. More malls are now operating on a base rent plus percentage of sales turnover arrangements, which aligns the interests of the owner and the retailer,” the report stated.
The report mentioned that hotels’ performance remained subdued due to a lack of international tourists.
The Central Agency for Public Mobilization and Statistics announced that he number of tourists arriving in Egypt registered a 30.7% year on year decline in December, totalling 677,649, slightly higher than the 672,878 figure recorded in the preceding month. In October, tourist visitations slumped by 52% year on year.
According to the Jones Lang LaSalle’s report, hotel occupancy in Cairo stood at 48% in 2013.
“The total investment in the industrial sector in Greater Cairo in 2013 is estimated to be around EGP 4bn, with the Egyptian government having allocated a further EGP 3bn for future development within the various industrial cities,” the firm stated with regards to real estate developments in the industrial sector.