By: Ayman Sami, JLL Country Head of Egypt

When speaking of the real estate market, the residential sector is the hottest topic to tackle. The industry is facing a new challenge, and it is not due to oversupply since demand is already soaring, but it is rather driven by the prevailing issue of affordability, which recently started to show some signs of recovery.

Firstly, units’ offerings are mainly focused on the upper middle class, yet there is a huge demand by middle- and lower-income classes. I believe that the government and developers are trying to reach a formula to solve this issue. On another note, the high competition led to the rise of new trends, the newest of which is offering finished units on installments.

With more activity around New Cairo and the New Administrative Capital (NAC), the rental market has witnessed a large increase in the prices and will continue to rise further due to the higher trading activity by retailers and the opening of more corporates in New Cairo. There is an increasing demand from residents to rent villas due to the increased business activity and limited levels of affordability towards purchasing villas. For the same reason, the growth of the secondary market is minimal and may drop in prices due to the slow purchasing power.

On the offices front, the performance is improving as the relocation of multinationals and businesses are still happening with more activity being witnessed in the oil & gas and e-commerce sectors. Another reason is the emergence of regional services centers due to Egypt’s competitiveness in terms of set-up and running costs after the EGP devaluation. Additionally, the relatively new trend in offices that is gaining attractiveness is co-working spaces or flexible offices.

When it comes to shopping malls, there is still a stronger direction toward value, and food and beverage (F&B). As for prices, rentals are also expected to increase, as affordability levels improve.

Furthermore, the performance of hotels is getting better and is expected to improve further. Room rates and occupancy levels are getting better due to the increased number of conferences and business travels, as well as the higher tourism figures.

In terms of location, east Cairo, especially NAC, is pulling more developers and buyers. Consequently, prices in east Cairo are outweighing those of west Cairo. However, the Grand Egyptian Museum (GEM) and Sphinx International Airport are strong drivers for the west side of Cairo.

This will create a touristic and lifestyle hub. In this context, I am expecting tourism to drive more activity in the west next year. This is encouraging the development of new hotels, as well as, rebranding and refurbishment of existing tourism developments.

We can conclude that west Cairo is generally linked to touristic activity and lifestyle, while the east side is catering more toward serving businesses and multinationals, and is becoming more like a central business district.

Talking of the new subsidy cuts, the price increases are not expected to be very big. Consumers got used to a certain level of annual inflation, yet they will not be able to absorb any price hikes. Accordingly, developers should take that into consideration and work carefully on managing their costs.

 

Find this opinion piece at our May issue, page no. 34