CAIRO REAL ESTATE MARKET
OVERVIEW
Q1 2016
CAIRO
MARKET SUMMARY
The major factor influencing the
Cairo real estate market in Q1 has
been the devaluation of the
Egyptian Pound (EGP). On 14
March 2016, the Central Bank of Egypt
announced a 14.5% devaluation in the
official value of the EGP from its previous
level of EGP7.73: US$1 to EGP8.85. The
CBE’s objective for this devaluation is to
create a more stable economic climate,
attract foreign investment, bolstering
confidence in the banking system and its
ability to finance major projects.
While there will be winners and losers
within the real estate industry, on balance
the devaluation is probably positive news
for this sector, particularly the hospitality
and residential segments. The office and
retail sectors may however suffer as
tenants struggle to pay dollar denominated
rents from EGP derived revenues. Other
impacts of the devaluation will be a boost
to exports (and therefore the industrial
sector), while imports will increase in price,
pushing up construction costs and inflation.
In other news, Phase I of the New Cairo
Capital will begin construction in April. The
first phase comprises ministerial &
government administrative buildings along
with an exhibition centre that will all be
constructed by Chinese companies. The
first residential community in the New
Capital has also been announced, with
construction by local Egyptian companies.
In another move to boost investor
confidence and revive the economy, the
government announced a Ministerial
reshuffle towards the end of the quarter.
The appointment of ex-private sector
figures in key ministerial positions is an
acknowledgement of the increased role
that the private sector will play in the
coming period.
CAIRO PRIME RENTAL CLOCK
RENTAL GROWTH
SLOWING
RENTS
FALLING
RENTAL GROWTH
SLOWING
Q1 2015
RENTAL GROWTH
ACCELERATING
RENTS
FALLING
Q1 2016
RENTS
BOTTOMING OUT
OFFICE
RENTAL GROWTH
ACCELERATING
RESIDENTIAL
RETAIL
RENTS
BOTTOMING OUT
HOTEL*
* Hotel clock reflects the movement of RevPAR
Note: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily
representative of investment or development market prospects. It is important to recognise that markets move at different speeds depending on their maturity, size and
economic conditions. Markets will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods.
Source: JLL
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016
CAIRO OFFICE
MARKET OVERVIEW
MARKET SUMMARY
Cairo’s office supply reached approximately
941,000 sq m GLA, with the completion of
Citadel Plaza in the Mokattam Area adding
nearly 20,000 sq m to the current office stock.
Although there remains demand for Grade A
office space, leasing activity is marginally slower
compared to same period last year. Given the
HOT TOPIC
Opportunity to purchase office space. With
continued restrictions on the repatriation of
profits, some multinationals and regional
companies have built up a large cash surplus
within Egypt. One means of combating rising
inflation and a devaluating EGP, is the purchase
of their existing office premises or other incomegenerating properties. To date, this trend has
limited new supply, vacancy rates declined over
the past year. Despite vacancies remaining high
(with 29% of the existing office stock
unoccupied), this decline is regarded a positive
for this segment.
Office rents have remained largely unchanged
over the quarter. The only exception was New
been stifled by the inability to match owners’ and
buyers’ pricing expectations.
Cairo Sector 1, where average rents fell by
around 4%. On a Y-o-Y basis, West Cairo is the
only market which recorded an increase in rents,
(the increase was recorded in mid 2015). With
tenants facing difficulties securing US$ to pay
rentals, more owners have been forced to accept
payment in EGP and rental caps have become
more widespread.
(2) more modern and efficient buildings and (3)
the availability of parking spaces and less
congestion than Downtown.
Surge in the movement of SME’s and local
companies from Downtown Cairo to 6th October.
Reasons driving this movement include: (1) the
affordability of the West (compared to New
Cairo),
OFFICE SUPPLY
CURRENT SUPPLY (2013 – Q1 2016)
FUTURE SUPPLY (2016 – 2018)
804K
889K
921K
941K
17K
70K
66K
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
Q1 2016
2016
2017
33
29
%
Q1 2015
%
Q1 2016
CENTRAL CAIRO
OFFICE PERFORMANCE
VACANCY RATE
2018
CAIRO RENTS (PER SQ M)
420
420
USD
USD
Q1 2015
Q1 2016
216
240
USD
USD
Q1 2015
Q1 2016
0%
Y-O-Y
11%
Y-O-Y
NEW CAIRO (S1)
2015
NEW CAIRO (S2)
2014
WEST CAIRO
2013
312
300
USD
USD
Q1 2015
Q1 2016
264
264
USD
USD
Q1 2015
Q1 2016
2016/ 2017
2016/ 2017
OUTLOOK / ANNUAL CHANGE
OUTLOOK / ANNUAL CHANGE
-4%
Y-O-Y
0%
Y-O-Y
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016
CAIRO RESIDENTIAL
MARKET OVERVIEW
MARKET SUMMARY
Q1 2016 saw the completion of 600 units across
several projects (including Mivida and Waterway
in New Cairo). There were no material
completions in 6th October during Q1 2016.
Average sale prices continued their decline in
US$ terms in most areas of the Cairo market
during Q1 2016, with further declines being
recorded for Villas in both New Cairo and 6th
October. The only exception to this trend has
been for apartments in New Cairo, where the
launch of new projects and strong continued
demand has resulted in a modest price increase
(4%).
Rentals have been somewhat less volatile than
sale prices over both Q1 and the past year.
While apartment rents have increased by around
3% in both New Cairo and 6th October over Q1
2016, average villa rents have fallen (by 10%
and 3% respectively).
HOT TOPIC
Currency devaluation could increase demand
for off-plan units if investors regard this as a
means of hedging against inflation and currency
risk. This was evident at the recent launch of the
Palm Valley project in West Cairo by Palm Hills
Developments (PHD). All units were offered and
sold within 48 hours, raising a total of EGP 491
million.
New Cairo Capital. Infrastructure and road
works have already commenced. The
construction of the first residential community
(composed of 20-25K units), will begin in April
2016. The President has stressed the need to
deliver phase 1 of the project (land area of 44.1
million sq m of a total of 126 million sq m) within
two years.
The government remains committed to its
ambitious plan to provide 656K residential units
across the country, as part of its social and
middle income housing scheme. The project is
due for completion in April 2017 at an estimated
cost of EGP 120 bn.
RESIDENTIAL SUPPLY
CURRENT SUPPLY (2013– Q1 2016)
FUTURE SUPPLY (2016 –2018)
85K
105K
113K
114K
28K
4K
3K
UNITS
UNITS
UNITS
UNITS
UNITS
UNITS
UNITS
2013
2014
2015
2016
2017
2018
Q1 2016
RESIDENTIAL PERFORMANCE
NEW CAIRO
APARTMENT
RESIDENTIAL
NEW CAIRO
6TH OCTOBER
SALES
SALES
-9%
-12%
RENTALS
RENTALS
RENTALS
3%
3%
-10%
Q-O-Q
-3%
Q-O-Q
SALES
SALES
SALES
SALES
7%
-3%
-12%
-10%
RENTALS
RENTALS
RENTALS
RENTALS
-1%
-21%
2%
0%
SALES
4%
-1%
RENTALS
Q-O-Q
Y-O-Y
Y-O-Y
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016
6TH OCTOBER
SALES
Q-O-Q
SOURCE: JLL
PROPERTY RENT AND SALES INDICES
Q-O-Q
VILLA
RESIDENTIAL
Y-O-Y
Y-O-Y
Y-O-Y
Q-O-Q
SOURCE: JLL
Y-O-Y
Q-O-Q
Q-O-Q
Y-O-Y
Y-O-Y
CAIRO RETAIL
MARKET OVERVIEW
MARKET SUMMARY
No additional retail space was completed in Q1
2016, with current supply standing at 1.3 million
sq m. In the latter part of 2016, we expect the
completion of Capital Mall in Heliopolis adding
nearly 45,000 sq m of retail GLA to the existing
supply. With further delays expected to the
HOT TOPIC
Shift towards convenience/value brands. With
continued restrictions on the import of nonessential goods and a decline in foreign currency
available, the luxury sector of the retail sector
has been negatively impacted. Combined with a
decrease in disposable incomes resulting from
higher inflation, the retail sector has shifted in
favour of value oriented brands.
opening of Mall of Egypt (150K sq m), this
project has been pushed out to 2017.
Vacancy rates have declined Y-o-Y (14% in Q1
2016 vs. 17% in Q1 2015), while remaining
largely unchanged over the past quarter.
Retail rents have also remained unchanged over
the quarter but are now facing downward
pressure. While rents have increased by 10%
compared to Q1 2015, all of this increase was
recorded in mid 2015 and rents now appear to
have reached their cyclical peak.
There remains interest from foreign retailers due
to the long term potential of the Cairo market.
With imports becoming more expensive and
retailers having to sell more goods (in EGP) to
pay for rentals (fixed in US$), short term
prospects are not however strong, with no rental
growth forecast for 2016.
RETAIL SUPPLY
CURRENT SUPPLY (2013 – Q1 2016)
FUTURE SUPPLY (2016–2018)
1.1M
1.2M
1.3M
1.3M
45K
338K
103K
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
SQ M (GLA)
2013
2014
2015
Q1 2016
2016
RETAIL PERFORMANCE
VACANCY RATE
17
14
%
%
Q1 2015
Q1 2016
1,500
USD
2017
2018
PRIME RETAIL RENTS (PER SQ M)
10%
Y-O-Y
Q1 2015
1,600
USD
Q1 2016
2016 / 2017
2016 / 2017
OUTLOOK
OUTLOOK
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016
CAIRO HOTEL
MARKET OVERVIEW
MARKET SUMMARY
No additional hotels were completed in Q1, with
limited construction activity in this sector. We are
expecting an additional 1,300 rooms to be added
in 2016, with the St. Regis Cairo being one of
the hotels to be delivered in the downtown area.
HOT TOPIC
Devaluation of the Egyptian Pound should
attract more Tourists. With Egypt becoming a
more competitive destination, this should lead to
an increase in tourists (and hence foreign
currency), providing current security and safety
concerns can be alleviated.
Occupancy rates (57% in year to February) have
increased marginally from the same period of
2015 as the sector struggles to recover from the
Russian Metrojet incident last year. Improved
airport security and the cheaper pound could
result in higher occupancy rates over the coming
year.
The financial performance of Cairo hotels has
declined marginally, with the average daily rate
(ADR) in the year to February decreasing by 2%
from that witnessed during the same period of
2015.
Promotion of cultural tourism in international
markets. Cultural tourism represented a mere
5% of total tourist arrivals in 2015, despite the
significant cultural attractions available in Cairo
and the relatively untapped markets of Luxor and
Aswan.
Recognising the potential to expand this sector,
relative to the currently dominant coastal tourism
segment, the Ministry of Tourism has
commenced a major campaign to promote
cultural tourism to Egypt in overseas
markets.
HOTEL SUPPLY
CURRENT SUPPLY (2013–Q1 2016)
FUTURE SUPPLY (2016–2018)
27,700
27,700
28,000
28,000
1,300
300
700
KEYS
KEYS
KEYS
KEYS
KEYS
KEYS
KEYS
2013
2014
2015
Q1 2016
2016
2017
2018
HOTEL PERFORMANCE
OCCUPANCY RATE
53
57
%
%
YT FEB 2015
YT FEB 2016
104
USD
AVERAGE DAILY RATE / ANNUAL CHANGE
-2%
Y-O-Y
YT FEB 2015
USD
YT FEB 2016
2016 / 2017
2016 / 2017
OUTLOOK
OUTLOOK
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016
102
DEFINITIONS AND
METHODOLOGY
12 o’clock indicates a turning point
towards a market consolidation /
slowdown. At this position, the
market has no further rental growth
potential left in the current cycle,
with the next move likely to be
downwards.
3 o’ clock indicates the market has
reached its point of fastest
decline. While rents may continue
to decline for some time, the rate of
decrease is expected to slow as
the market moves towards a period
of rental stabilisation.
OFFICE
The supply data is based on our quarterly survey of the
Grade A office space located in Downtown, New Cairo
and West Cairo. The historic supply data has been
revised since the Q4 report to reflect updated information.
Completed building refers to a building that is handed over
for immediate occupation.
Prime Office Rent represents the top open-market rent
(exclusive of service charge, tenant incentives & local
taxes) that could be expected for a notional office unit of
the highest quality and specification in the best location in
a market, at the survey date.
Vacancy rate is based on estimates from the JLL Agency
team for a basket of leading office buildings. This basket
represents around 86% of the current supply to quality
office space in Cairo.
RETAIL
Classification of Retail Centres is based upon the ULI
definition and based on their GLA:
- Super Regional Malls have a GLA of above 90,000 sq m
- Regional Malls have a GLA of 30,000 - 90,000 sq m
- Community Malls have a GLA of 10,000 - 30,000 sq m
- Neighborhood Malls have a GLA of 3,000 - 10,000 sq m
- Convenience Malls have a GLA of less than 3,000 sq m
6 o’clock indicates a turning point
towards rental growth. At this
position, we believe the market has
reached its lowest point and the
next movement in rents is likely to
be upwards.
9 o’clock indicates the market has
reached the rental growth peak,
while rents may continue to
increase over coming quarters the
market is heading towards a period
of rental stabilisation.
RESIDENTIAL
The supply data is based on our quarterly survey of 100
projects located in New Cairo and 6th of October, starting
from 2011.
Completed building refers to a building that is handed over
for immediate occupation.
Residential performance data is based on two separate
baskets of projects, one for rentals and the other for sales
of villas and apartments. The rental performance is based
on 3 bedroom villas and 2 bedroom apartments. The
sales data relates to primary sales of fully finished units
(directly from the developer) and excludes both sales in
the secondary market and those of units handed over in a
shell and core condition.
HOTEL
Hotel room supply is based on existing supply figures
provided by the Egyptian Hotel Association as well as
future hotel development data tracked by JLL Hotels.
Room supply includes all graded hotel supply and
excludes serviced apartments.
STR performance data is based on a sample of
internationally branded midscale and upscale hotel
properties.
Prime Rent represents the quoted rent for top end line
stores within the top 5 super regional and regional malls in
greater Cairo.
Vacancy rate is based on estimates from the JLL Retail
team, and represents the average rate across standard in
line unit shops at regional malls
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016
Cairo
Star Capital 2
8th Floor, Office 86
2 Aly Rashed Street
Heliopolis
Cairo, Egypt
Tel: +20 2 2480 1946
Fax: +20 2 2480 1950
For questions and inquires about the Cairo real estate market, please contact:
Ayman Sami
Country Head
Egypt
[email protected]
Dana Williamson
Head of Agency
MENA
[email protected]
Andrew Williamson
Head of Retail
MENA
[email protected]
Chiheb Ben-Mahmoud
Head of Hotels & Hospitality
MEA
[email protected]
Craig Plumb
Head of Research
MENA
[email protected]
Tarek El Kady
Research Analyst
Egypt
[email protected]
@JLLMENA
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