The industrial sector is a major growth driver having strong backward and forward linkages with both the agriculture and services sectors. It is expected to play an instrumental role in reinvigorating economic growth in the Egyptian economy over the medium and long terms. Therefore, Invest-Gate observes an investment door wide open in Egypt’s industrial real estate.
Traditionally, the most important industrial sectors in terms of contribution to manufacturing value-added are engineering and electrical machinery, food processing, chemicals and pharmaceuticals, textiles and garments, building materials, furniture, and paper and paperboard. Medium-technology industries are the heartland of industrial activity in mature economies, comprising the bulk of skill and scale-intensive technologies in capital goods and intermediates.
“The ministry is keen on attracting new domestic and foreign investments in the manufacturing sector, especially industries with high added value and technological component, which would increase the competitiveness of Egyptian products on local and foreign markets,” confirms Minister of Trade and Industry Nevine Gamea.
Egypt’s New Cities Go Industrial
Industrial real estate refers to properties used to develop, manufacture, or produce goods and products, as well as logistics real estate that supports the movement and storage of products and goods.
The idea of industrial cities began in the early 1970s, with Al-Sadat, 10 Ramadan and 6 October City being built during the last years of the rule of former president Anwar Al-Sadat. The aim was to build integrated industrial zones that would contribute to the country’s overall gross domestic product (GDP). 40 something years later, the futuristic industrial plan sees light!
This strategy has shifted over the past years, however, from establishing industrial cities to complexes that host a single industrial activity. These started with a plastic manufacturing complex in Margham in Alexandria, a furniture city in Damietta, and a textiles complex in Al-Sadat City. The latter hosts 568 textiles plants with investments exceeding $2.2 bn and annual production worth more than $9 bn. It is expected to provide all services related to the textiles industry, including a state-of-the-art training faculty, and to generate 160,000 job opportunities.
Former Minister of Trade and Development Amr Adel Bayoumi reveals that Upper Egypt is home to 37% of industrial zones in the country, with investments worth EGP 75bn. With 50 industrial complexes out of a total of 114 nationwide.
“Achieving comprehensive sustainable industrial development in the governorates of Upper Egypt is a top priority during the current period,” Gamea says, noting that the ministry seeks, in coordination with all state agencies, to develop the industrial zones in Upper Egypt and benefit from the economic and natural potential there.
The minister adds that the infrastructure of four industrial zones in Qena and Sohag is being developed, within the Upper Egypt Local Development Program (UELDP), which targets six industrial areas, four in Sohag and two in Qena with a financing of up to $500mn by the World Bank.
Future plans for industrial cities
In June 2021, the Egyptian government announced allocating EGP 10bn to establish 3 industrial cities and 17 industrial complexes for small industries across 15 governorates over the coming 7 years.
The new cities will feature a total of 5,046 industrial units and will provide more than 48,000 direct job opportunities.
Additionally, the Public Authority for Industrial Development and the General Authority for Investment and Free Zones announced the launch of the second phase of industrial investment plots in Egypt, in 12 governorates, including 16 industrial zones with a total of 1,705 pieces of land allocated for industrial activity within the framework of the state’s directions to support industry and encourage investments.
“Before talking about industrial cities we should talk about industrial development strategy. Egypt built a strong infrastructure base for development and has enough resources to start an industrial development plan. In the last 10 years, we didn’t see any realistic structure to build an Egyptian industrial positioning.. it is time to have it now,” President and Founder of FIABCI-Egypt Abdel Nasser Taha tells Invest-Gate.
“Industrial development is not limited to cities, it starts with education, incubators, finance, marketing, logistics & ends up by smart human resources,” Taha adds.
“Technology will likely be the key to establishing the link between the industry and real estate developers, A published digital map of all this information, coupled with favorable investment laws specific to industrial city investments, will be the building blocks leading to the success of any industrial city,” highlights Head of the Egyptian Real Estate Developers Council Adel Lotfy.
Investing in Industrial Real Estate
Investors and real estate developers have multiple ways to add industrial real estate to their portfolios, including purchasing vacant land and developing an industrial facility, buying an industrial property from another real estate investor, or acquiring it in a sale-leaseback transaction, investing in a real estate investment fund focused on industrial properties, and buying shares of an industrial real estate investment trust (REIT) in a brokerage account. These options vary in investment size, risk/reward profile, and holding period.
While industrial properties are not as glamorous as other types of real estate, they are vital to the economy. This means investors usually sign long-term leases that supply them with stable cash flow. Add in the sector’s growth potential, and real estate investors won’t want to overlook this essential property type.
Ahmed Sobhy, CEO of Four Walls for Real Estate Company, says that the idea of industrial cities will help in supporting and reviving the Egyptian economy, in addition to offering new job opportunities. This in turn will improve the standard of living and reconstruct vacant areas. Sobhy adds that the Egyptian government is focusing on urban expansion, and enhancing the infrastructure through establishing new roads and bridges linking all governorates.
Private developers see that linking industry and investment with real estate development is increasingly beneficial for them in terms of the number of investments and residents, who are in need for residential and commercial properties to serve workers in these locations.
Sobhy points out that the government’s recent projects encouraged foreign and local investors to inject more investments in the Egyptian market, including Apple, Honda, and Amazon.
Real estate in Egypt is going through a proverbial fork in the road. For local developers to continue to grow, they need to align their construction progress with industrial development, especially among sectors considered a priority by the state.
Sobhy further notes that Egyptian real estate developers could resort to investing in industrial properties, as such kinds of investments are beneficial for both the country and investors at the same time. Additionally, real estate developers have a significant role in establishing new cities and the remarkable urban expansion. Real estate developers could inject more investments, especially that the Egyptian market is a consumer one. Investing in industrial properties will be a great benefit to the country itself and the developer, as it will reduce the unemployment rate significantly and provide foreign currency.
“Any real development growth in any country should consider the industrial development the core where all the country efforts should help the industrial development plan,” Taha states, adding, “the country in divided into regions with different characteristics & resources where each one is capable of carrying different competitiveness edge.”
Silo Foods City & Amazon
In August, President Abdel Fattah El-Sisi inaugurated the industrial food city, Silo Foods, in Sadat city, Menufiya governorate, becoming a great edifice and a real addition to the state’s ability to achieve self-food sufficiency.
The city is built on 135 feddans with a total of 567,000 sqm; it contains 10 different factories and 470 tons of various products annually, about 40 products.
It contains 10 laboratories for various analyzes, research and development, the transportation sector and the health movement of products, administrative buildings, a hotel accommodation, staff services and a medical point. The capacity of silo increased from 1.2mn tons in 2014 to 3.4mn tons in the running year.
By strengthening its focus on industrial zone development, Egypt bets on its potential to expand its manufacturing base and regain its position as an attractive locale for FDI. Easing time and costs constraints to set up new factories will be critical.
Egypt is set to be the leading industrial power in the Middle East and North Africa (MENA) by the year 2050 as well as the main export hub for medium-technology manufactured products.
In September, Amazon, the leading renowned global online shopping platform, has officially inaugurated its warehouse in Egypt. The warehouse is located in the 10th of Ramadan city and has been established over an area of 28,000 sqm.
“A lot of international studies was made to show this competitiveness and it is time to define who will carry the responsibility of such vital file.. in the new Egyptian republic,” Taha concludes.
