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Egypt Real Estate Report Q4 2010
Business Monitor International, Aug 2010, Pages: 67
The Egypt Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Egypt's Real Estate industry.
In mid-2010, BMI’s in-country sources confirmed that Egypt is in the early stages of a major real estate boom. Across all five cities from which we have gathered data (Cairo, Alexandria, Sixth of October City, New Cairo and Giza), rents and capital values have risen over the past six months or so in the office and retail sub-sectors, while yields have fallen. Rents and yields appear to have tracked sideways in the less active industrial sub-sector.
The findings from the latest round of interviews are consistent with what we deduced from the previous round, which we conducted at the end of 2009. A very substantial increase in the supply of commercial property – thanks in part to the development of new cities to the east and west of Cairo and in part due to projects in the capital itself – means that years (perhaps decades) of under-development are finally being addressed. For a long time businesses have had little option but to operate in (typically old) buildings originally constructed for residential purposes. Now they have some choice.
Demand is also coming from two other quarters. Western multinationals are establishing and/or expanding their presence in Egypt, with the result that they need more office space. At the same time, Middle Eastern companies are relocating to Egypt, often in response to more difficult conditions in Dubai and Lebanon. Significantly, this second group of companies understands and is tolerant of the risks of operating in Egypt. Even if the political noises surrounding the forthcoming elections produces widespread unrest, these regional companies are unlikely to reconsider their plans.
The result is that conditions are dynamic. Vacancy rates vary, but are generally low or falling. Looking ahead, we expect that the optimism of protagonists in the office and retail sub-sectors will be justified. There should be a double-digit increase in rentals in these sub-sectors in 2011; further – if smaller – rises are likely in the following years. Over the forecast period (2011-2014), we envisage that capital values will increase rather more than rentals. As a result, the general downtrend in yields should continue. Egyptian assets are being rerated, and the country’s commercial real estate sector is a clear beneficiary of this.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that we seek to answer for each country remain as follows: What are the main issues for actors in and around real estate development in the country concerned, over both the long and the short term? What are the main constraints that they face? What are the key insights to be gleaned by comparing the real estate sector of a country with its regional peers?
In Q3 we introduced a very substantial improvement to our reports. We incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology section of this report.
In Q410 we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data through a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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