EGYPT. Jones Lang LaSalle, the world's leading real estate investment and advisory firm, has today published its latest Cairo Real Estate Overview, which suggests that, following the country’s difficulties in 2011, the future looks more positive.
It believes that there is evidence of more clarity and increased activity, with confidence returning twelve months after Egypt’s revolution. However, with significant uncertainty still evident, much will also depend upon the Country’s ability to address many of the residual challenges that are still largely unresolved.
Commenting on the report, Ayman Sami, Head of Jones Lang LaSalle’s Egypt Office, said: “It’s a challenging time but we are optimistic about the long term fundamentals of the Cairo real estate market. If the country is able to address its political issues then we are confident that activity will return to the market relatively quickly as demand exists across a number of sectors. We are already seeing some evidence of increased activity but continued certainty is a basic requirement for the economy to fully rebound.”
Indicators that 2012 should see a potential improvement in the Cairo real estate market include:
• Current and active demand for between 5,000 and 15,000 sq m of office space from a number of international FMCG and petrochemical occupiers.
• Retailers continue to open new stores with recent examples including American Eagle and Pinkberry opening their first stores in Egypt at CityStars and LC Waikiki (a Turkish retailer) opening their first store in December 2011 at Sun City Mall in Heliopolis.
• Some Real estate projects will continue towards completion in 2012. Cairo Festival City will deliver its first office phase in mid-2012 and Damac is looking to open its retail and office project opposite Dandy Mall before the end of the year. The market is witnessing a revival of other mixed use projects driven mainly by UAE and Qatari developers.
Ayman Sami concluded: “For the longer term investor, Egypt will always be an attractive market with considerable potential. There is opportunity in the many challenges that need to be addressed, such as more affordable housing, but the sector needs stability to be able to do this.”
Office: There is current stock of about 700,000 sq m of Grade A office stock across the Cairo metro area. No new Grade A space was completed in 2011 but up to 120,000 sq m could be delivered by the end of 2012. However Jones Lang LaSalle anticipates this is more likely to only be around 60,000 sq m given the current situation with many planned projects experiencing extended delays.
This will include Cairo Festival City, Mivida by Emaar Misr and Citadel Plaza by Alkan Holding. Prospective tenants are therefore seeing an improved standard of available space and greater choice. Vacancy is approximately 35% but is expected to increase in 2012 given the proposed new space due to be delivered.
Average office rents peaked in 2010 at US$55 per sq m per month for prime Grade A space but declined by 20% in 2011 to US$ 45 per sq m per month.
Retail: Total stock at the end of 2011 of mall based retail space was approximately 786,000 sq m. Major completions included Phase 1 of Mall of Arabia in Sheikh Zayed and Sun City Mall in Heliopolis which is currently 40% operational. Despite delays a possible 260,000 sq m of new retail space could enter the market before the end of 2013.
Cairo Festival City is not expected to be open until 2013. With the completion of other retail developments, such as a number of mixed use schemes could push the total retail floor space in Cairo to as high as 1.8 million sq m by 2014 with 29% of supply comprising super regional and regional malls by 2015. This percentage is expected to increase with the completion of multiple community and regional malls.
Limited supply of good quality retail space should have resulted in strong competition for quality space and associated rental growth but the market has seen a decline in the regional and super regional malls by as much as 20-30%.
However with initial signs that retail trade is improving, with many retailers still looking to expand, rental rates should now stabilise, although any future increase in supply could result in further falls. Many centre managers now have to compete more aggressively to attract potential and keep their retained retailers.
About Jones Lang LaSalle MENA
Across the Middle East, North and Sub-Saharan Africa, Jones Lang LaSalle is a leading player in the real estate market and hospitality services market. The firm has worked in 35 Middle Eastern and African countries and has advised clients on more than US$ 1 trillion worth of real estate, hospitality and infrastructure developments.
Jones Lang LaSalle employs over 100 internationally qualified real estate and hospitality professionals of 30 nationalities with regional offices in Dubai, Abu Dhabi, Riyadh, Jeddah and Cairo.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide , including 200 corporate offices.
The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company's investment management business, is one of the world's largest and most diverse in real estate with US$ 47.7 billion of assets under management.