Egypt’s new cities encourage increased demand for office space: Fitch Solutions

Shaimaa Al-Aees
4 Min Read

Egypt’s fourth generation cities will likely encourage an increased demand for administrative units, according to Egypt Fitch Solutions’ Real Estate Report for the first quarter (Q1) of 2020.

Although Cairo will remain the prime location for office space for that period, interest has also been sparked in the country’s new developing cities, particularly the New Administrative Capital (NAC) and New Alamein City. 

Despite the global recession caused by the novel coronavirus (COVID-19) pandemic, Fitch Solutions expects office real estate rental growth to remain positive, albeit at levels that are a little subdued.

The report highlighted that Cairo maintains its focus on occupiers, while a lack of available stock and strong competition are encouraging demand in regional locales.

“Tenants continue to compete for space in Cairo, where the highest quality stock can be located,” the report said, “The New Cairo market continues to see the highest demand for space out of the three cities we cover and their respective sub-markets.”

As supply remains limited but demand is steady in Cairo, the office market is stable to growing, the report noted. It added that there has been a mild slowdown in activity in 2020, as work from home activity has encouraged some businesses to delay or reduce investment plans.

Fitch forecasted that average rental rates for Cairo office space rose in 2020, and expects them to edge higher again in 2021 to between $18.8/sqm and $31.3/sqm, averaging $25/sqm, up by 13.2% year-on-year (y-o-y).

Meanwhile, rental rates for office space in Giza are forecast to edge a little higher in 2021, coming in at a range of between $11.4/sqm and $17.7/sqm, averaging $14.6/sqm, up by 1.5% y-o-y.

In Alexandria, Fitch forecasted that rental rates in 2021 will range between $10.6/sqm and $18.3/sqm, averaging $14.5/sqm, down by 0.2% y-o-y.

“While we expect the Central Bank of Egypt (CBE) will keep interest rates on hold throughout the remainder of 2020, we still forecast further cuts in 2021 to help support the economic recovery from the pandemic,” Fitch said, “We therefore expect interest for prime office space in Egypt from companies in the banking, oil and gas, food and drink, internet and fast-moving consumer goods sectors will improve in 2021, with Cairo set to remain the city of choice and Alexandria to experience a pick-up in demand over the medium term.”

The report projects a mild increase in demand and little change in average rent levels in the country’s retail property sector in 2021. Beyond 2021, however, demand and rents will most likely recover with gains also driven by the continued development of the new cities.

It expects rental costs at a range of $22.2/sqm to $41/sqm in 2020, averaging $31.6/sqm, down by 0.05% y-o-y.

Restrictions on travel, trade, and movement have negatively impacted footfalls in Cairo during much of 2020. Although hopes for a vaccine are gaining strength, Fitch forecasts little change in retail rents across Cairo in 2021.

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