Antoine El Khoury: Egypt is changing very quickly and has been going through an in-depth transformation, and has become one of the most growing, most promising, most regarded business platforms in the world.
Egypt has become the preferred destination for business and investment in the middle of this whole Africa and the Middle-East region, with 1.5 billion people.
Big multinational companies are entering the market every day and establishing in Egypt their regional platforms for Africa and the Middle-East.
Managing director of TAMEER Antoine El Khoury have recently spoken at the Cityscape Egypt virtual conference and have shown a particular faith in the future of the real estate sector in Egypt. Antoine has an optimistic vision about the current situation of the real estate in Egypt, as he sees that Egypt is changing very rapidly and has been going through an in-depth transformation, and has become one of the most growing, most promising, most regarded business platforms in the world. He believes that this success story is driven by a clear vision and determination of the nation’s leadership, and by the massive and structural modernization of the country and its infrastructures. Moreover, during the conference, Mr. El Khoury have said that The country is enjoying a political and monetary stability and an unmatched economic growth and Egypt has become the preferred destination for business and investment in the middle of this whole, 1.5 billion people, still under-developed, Africa and the Middle-East region. As a result, more and more multinational companies are entering the market every day and establishing in Egypt their regional platforms for Africa and the Middle-East.
Adding to the above, Antoine is a believer that real estate is a sector that supports the economy, by providing space for growth. Growth in any sector of the economy requires space, would it be offices or retail, or factories or logistic hubs or else. When the economy grows, the demand for space grows as well and this boosts the real estate industry. Moreover, the middle class in Egypt is growing very quickly in terms of purchasing power and in terms of lifestyle. This is creating a need for further quality destinations for social life and consumption.
During his word, Antoine emphasized that when people look carefully at the Egyptian real estate, they can easily identify new trends that are emerging in the market, which is clearly diversifying towards the non-residential area. Market players have identified the new needs and are adapting, paving the way for a more mature environment. He adds that this is a good start, because it creates the space and the investment opportunities, as well as the products needed to fill the gap that will be created by the demand. But this is not enough from an investment point of view. Antoine believes that the opportunity for the sector and for the economy in general is far much bigger than what local players are anticipating today.
Discussing the opportunities in the institutional income generating real estate, Mr. El Khoury says that these opportunities are what large foreign investors, such as sovereign funds, pensions funds or international private funds look at. Real estate is an investment asset that has different cycles, which are differently positioned on the risk-return curve. The first cycle, the most rewarding, but the riskiest, is the speculative development. Developers launch projects that are sold off-plan. This is where the Egyptian market is active now. This particular cycle is usually not attractive for institutional investors who have a lower risk appetite. Those investors usually enter the market once the construction is completed and the asset is let to good tenants and generating steady cash flows. In the investment language, these are called “stabilized investments”.
Antoine has also shared three indicators at Cityscape talk that illustrate what this opportunity would represent for Egypt, these indicators are:
- The First Indicator: Foreign Direct Investment in all areas of Egypt real estate has reached approximately 450 USD in 2020, which represents a tiny 0.125% of the GDP.
- The Second Indicator: Investment in commercial, income generating real estate in the United Kingdom has reach 95 billion USD in 2020, representing 3% of the GDP.
- The Third Indicator: 762 billion USD have been invested globally in 2020 in commercial income generating real estate.
Antoine has also an opinion regarding the foreign investment for the real estate sector in Egypt right now. He sees that the current time is very attractive for foreign investors, because now is the right timing to enter the market and benefit from the growth. Egypt is standing at the very beginning of its growth curve and this is where the value will be created. Later, the market will have matured and the benefits will be less. He said that the high-level simulation that they have carried-out internally in TAMEER has shown that, due to cap rate compression and rental growth, capital values may double or triple over the next 2 to 5 years. Furthermore, Antoine mentioned the indicators of the Egyptian economy are showing a clear trend towards a compression of cap rates in the next 3 to 5 years. This will be a direct, mechanic consequence of the improvement of the sovereign risk of Egypt as perceived by the international institutions, and as confirmed by the economy indicators. The consistent decrease of interest rates and discount rates by the Central Bank are an illustration of such improvement. The decrease of the real estate industry risk, due to the development of the sector and the structural improvement of the governmental procedures, can reasonably be forecasted as well. Finally, the acceleration of the rental growth rate due to an increased demand will further support this compression. These mathematical parameters are those factored by real estate investors to justify their decisions.
Mr. El Khoury is a member of the French chamber of commerce in Egypt and according to this, he mentioned that there are 165 French companies currently operating in Egypt, mostly large corporations listed on the French CAC 40 and employing some 38,000 people in Egypt. The extrapolation of these figures to cover all multinational companies as well as Grade A national corporations gives an indication of what would be the size of the High Credit rental market in the next few years.
He pointed out that his company “TAMEER” is engaged in this new investment direction, as they have started recently their diversification towards the non-residential real estate. Such as, THE BUSINESS LOUNGE @ azad which was launched in January. It is an exclusive one-building business and community lounge that was designed by Mona Hussein, and is developed on the edge of AZAD residential community. The construction and the sales are currently ongoing.
TAMEER has also started working on a mixed-use development in New Cairo, on a 55,000 sq m land. The project is being designed by the French award winning “Architecture Studio”, who has signed the “Institute of the Arab World” in Paris and the “European Parliament” in Strasbourg. They are working hand in hand with ACE – Moharram Bakhoum and with JLL. The project will consist of 75,000 sq m of office space and 15,000 sq m of retail, along a vibrant urban pedestrian street.