JLL: Egypt’s Real Estate Market Sees High Activity in Q3

JLL: Egypt’s Real Estate Market Sees High Activity in Q3

The sales market in Cairo witnessed higher levels of activity in Q3, as buyers looked to hedge against inflation and currency devaluation by investing in real estate, Invest-Gate reports.

According to a recent report by JLL, buyers were being selective and mainly opted to purchase property from well-reputed developers with strong balance sheets.

Despite the prevailing economic conditions and the overall slowdown of the office sector, Cairo has been witnessing an upsurge in enquiries for office spaces. This comes on the heels of ICT outsourcing companies seeking to operate in Cairo. This segment typically requires small office spaces ranging from 100 to 600 sqm. Additionally, interest in larger offices from new market entrants has also increased compared to three months earlier.

Additionally, due to import restrictions, the limited availability of materials required for fit-out work has resulted in an overall increase in the cost of fitting out office spaces. As a result, many local tenants are avoiding leasing shell and core units due to the higher associated costs.

“With both landlords and occupiers unwilling to bear the full cost of office fitouts, the market is experiencing a trend upturn, creating an opportunity for operators who are now opting to lease-out whole buildings at a discount, undertake fit-out work, furnish them, and then re-lease units to prospective tenants. However, unlike flexible offices, these are typically rented to tenants on a long-term basis,” Ayman Sami, JLL’s Country Head at Egypt, comments.

However, Q3 saw the average asking price for renting office spaces in the capital rise by 5% y-o-y to around USD 347 per sqm per annum, and over the same period, Cairo’s office vacancy rate increased to 10%, marking a slight increase from Q3 2021’s 8%.

Around 95,000 sqm of office gross leasable area (GLA) was delivered in Q3 2022, bringing Cairo’s total office stock to almost 1.9 mn sqm. In addition to this, the last quarter is expected to see the completion of around 38,000 sqm of floor space.

Further, over 5,000 residential units were handed over in the capital. This brought the total stock to around 242,000 units. Going into Q4, nearly 7,000 units are scheduled for completion.

According to JLL, a combination of rising inflation and currency devaluation in Egypt has led to the prices of some construction materials to more than double in Q3 2022, compared to the corresponding period last year. Although this is causing delays to deliveries, many developers have ensured the continuation of construction work onsite regardless of such pressures.

Thus, many developers have raised the prices by double digits in Q3 on both off-plan and completed properties. This is largely due to their effort to maximize returns in light of the current successive economic crises. Despite this, it is worth noting that developers continued to offer incentives to entice prospective buyers and investors.

As for the secondary segment, prices and rents remained on an upward course. Annually, sales prices increased by 7% in Sixth of October City and 13% in New Cairo, respectively, while annual average rents increased by 7% in Sixth of October City and 3% in New Cairo.

The hospitality sector turned corners with many developers and operators eyeing the segment for opportunities to develop and operate new hotels despite the future pipeline of hotel keys in Cairo being currently limited.

Moreover, from the perspective of the retail sector, the rising cost of goods and services has impacted consumers’ purchasing power and, in turn, retail sales. However, the current situation has unlocked a plethora of new opportunities in the fields of fintech and proptech, propelling the emergence of start-up companies that offer online financial solutions to buyers.

In terms of performance, the vacancy rate in Q3 remained stable at 11% when compared to Q3 2021, and average retail rents increased slightly by 1% for both primary and secondary malls.


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