Q3 2014
Cairo Real Estate
Market Overview
Cairo Market Summary
The third quarter of 2014 saw further political stability as the regime proceeded with implementing its roadmap.
Following the reduction of energy subsidies, the government is currently reforming the tax system, a measure
that should boost the economy and halve the budget deficit within seven years, according to the Finance
Minister. The positive sentiment that has placed the economy on the road to recovery is reflected in the
announcement of the ambitious Suez Canal Regional Development Project. The plan to expand Egypt’s
economic lifeline is expected to draw in domestic and international investment and finance industrial and export
services as well as reinforcing the industrial and logistics backbone of Egypt’s economy. Blueprints for other
major national projects are also being prepared, including the ‘Golden Triangle’ which aims at exploiting the
natural resources and mineral wealth in Upper Egypt. Against this improving economic backdrop, the third
quarter saw increased confidence in the real estate market. Demand remains relatively active across all
segments and developers are moving forward with both new and re-launched projects.
Cairo Prime Rental Clock
Q3 2013
Rental Rents
Growth Falling
Slowing
Rental Rents
Growth Bottoming
Accelerating Out
Residential
Hotel* Office
Retail
Q3 2014
Rental Rents
Growth Falling
Slowing
Rental Rents
Growth Bottoming
Accelerating Out
Residential
Hotel* Retail Office
* 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
Cairo Office Market Overview
Market Summary Hot Topic
The office sector remained relatively unchanged over the third Developers continue to offer new products and solutions to attract
quarter with the addition of just one new project. The release of occupiers that were previously discouraged by the poor quality
additional space at City Stars Properties added 4,000 sq m to the options available. Smart Village has acquired 150,000 sq m in
total office stock, which now stands at around 890,000 sq m. Future City in New Cairo for a new development. Elsewhere,
innovative solutions like the reuse of the AUC Greek Campus in
Rental rates have remained flat over the past year. While Downtown have been introduced, while Regus have introduced
vacancy rates remain high (27%) there is increased interest from flexible short-term leases to attract occupiers to their serviced
international occupiers for additional office space in New Cairo. office projects.
Vacancy rates have increased marginally over the quarter due to
the introduction of an additional 4,000 sq m of office space by Our forecast of future office supply has been reduced, with Cairo
City Stars and 50% of Future Gate New Cairo that is currently Festival City postponing the delivery of Phase II (50,000 sq m) from
being offered for rent on a sub-lease basis. 2016 to Q4 2018.
Office Supply
Current Supply (2011–2014) Future Supply (2014–2016)
715K 773K 819K 889K 15K 52K 0K
SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA)
2011 2012 2013 Q3 2014 Q4 2014 2015 2016
Office Performance
Vacancy Rate Cairo Rents (USD Per sq m / Per Annum)
Q3 2013 Q3 2014
26% 27% Central Cairo 420 420
Q3 2013 Q3 2014 New Cairo, Sector 1 300 300
New Cairo, Sector 2 216 216
West Cairo 216 216
2014 / 2015 2014 / 2015
Outlook Outlook
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Cairo Residential Market Overview
Market Summary Hot Topic
The residential market has been the strongest performing sector Despite the ongoing delays in the delivery of residential projects,
in Cairo in Q3, with the sales recovering ahead of rents in most some developers remain active in the market. SODIC for
locations as confidence returns. With the exception of villa rents example, have completed the construction of phases 3-5 of
in 6th of October, sales and rents increased across the basket Westown in 6th of October a year ahead of its scheduled
monitored by JLL. While prices and rents in New Cairo remain completion date.
above those in 6th October, the gap has narrowed somewhat in
recent months, with the strongest price growth being recorded in With the sales market performing well in the 6th of October area,
6th October City. Kuwadico has launched a new phase of fully finished units in its
Grand Heights project. These are naturally selling at a higher
As confidence is restored to the market, the residential sector is price compared to those being offered on a semi finished basis.
expected to recover its dynamism and show continued growth in
prices and rentals over the remainder of 2014 and into 2015.
Residential Supply
Current Supply (2011–2014) Future Supply (2014–2016)
67K 74K 85K 88K 28K 25K 9K
Units Units Units Units Units Units Units
2011 2012 2013 Q3 2014 Q4 2014 2015 2016
Residential
ResidentialPerformance
Performance
Residential Property Rent and Sale Growth
Apartment New Cairo
Sales Rentals
6th October
Sales Rentals
Villa New Cairo 6th October
Residential Sales Rentals Sales Rentals
2% 2% 11% 0% Residential 5% 2% 9% -1%
Q-o-Q Q-o-Q
Sales Rentals Sales Rentals Sales Rentals Sales Rentals
21% -16% 20% -4% 28% 5% 5% -6%
Y-o-Y Y-o-Y
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Cairo Retail Market Overview
Market Summary Hot Topic
Cairo’s retail market registered a slight improvement in The retail market remained active over the third quarter with the
performance over the third quarter. Average rents increased 2% opening of Galleria 40 in West Cairo. Most units have been
Y-o-Y as owners of prime malls increased their asking prices, leased to international brands with the F&B segment dominating.
encouraged by interest from international brands. This comes as A further 364,000 sq m of retail space is expected to be
the Cairo retail landscape continues to transform from small, completed over the remainder of 2014, including the delivery of
local shops to larger malls with international brand two Super Regional malls, Citadel Plaza in Mokattam & Madinaty
representation. The retail market is expected to witness the Mega Mall in New Cairo. With these new deliveries, the retail
opening of around 970,000 sq m of additional space over the market in Cairo is poised for future growth and development.
next two years, the majority of which will be within Super
Regional & Regional malls.
Retail Supply
Current Supply (2011–2014) Future Supply (2014–2016)
762K 836K 1.1M 1.2M 364K 297K 313K
SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA) SQM (GLA)
2011 2012 2013 Q3 2014 Q4 2014 2015 2016
Retail Performance
Vacancy Rate Average Retail Rents (Per sq m)
USD 780 - USD 1,320
26% 23% Q3 2013
Q3 2013 Q3 2014 Q3 2014 USD 720 - USD 1,416
2014 / 2015 2014 / 2015
Outlook Outlook
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Cairo Hotel Market Overview
Market Summary Hot Topic
Recent political stability coupled with government efforts to Egypt’s tourism industry continues to see overall improvement
revive Egypt’s tourism sector have reflected positively on the with a revival in visitor numbers in certain markets. According to
performance of the hotel market in the third quarter. While YT the Egyptian Tourism Authority, the number of UAE tourists grew
August occupancy levels remain lower than they were in 2013 by 35% during the first 5 months of the year. Eastern Europe
(42% vs. 56% respectively), ADR’s have improved significantly was the largest source market, with 1.9 million visitors to Egypt
registering a 106% increase Y-o-Y. These rates are expected to (45% of the total) over the first half of 2014 (CAPMAS). As
improve further as Cairo’s hotel market remains stability and security continues to improve across the country,
underdeveloped, with limited supply in the pipeline. The hotel the tourism and hospitality sectors are expected to regain their
sector is expected to perform well over the remainder of 2014 as momentum and record improvement in performance over the
the government launch further new initiatives to attract tourists. remainder of 2014.
Hotel Supply
Current Supply (2011–2014) Future Supply (2014–2017)
27,500 27,500 27,700 27,700 331 292 0 350
keys Keys Keys Keys Keys Keys Keys Keys
2011 2012 2013 Q2 2014 Q4 2014 2015 2016 2017
Hotel Performance
Occupancy Rate Average Daily Rate
56% 42% USD 50 USD 103
YT August YT August YT August 2013 YT August 2014
2013 2014
2014 / 2015 2014 / 2015
Outlook Outlook
Source : STR Global Source : STR Global
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Definitions and Methodology
Interpretation of market positions:
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.
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.
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 fully finished units, rather than those handed over in a shell and core
condition.
The two baskets cover projects in both New Cairo and 6th of October
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 Q2 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. Vacancy rates have been revised for previous
quarters.
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
Prime Rent represents the quoted average rent for the top 5 shopping 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
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.
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 Dana Williamson Andrew Williamson
Country Head Head of Agency Head of Retail
Egypt Office MENA MENA
ayman.sami@eu.jll.com dana.williamson@eu.jll.com andrew.williamson@eu.jll.com
Chiheb Ben-Mahmoud Craig Plumb Eman Hussein
Head of Hotels & Hospitality Head of Research Research Manager
MEA MENA MENA
chiheb.ben-mahmoud@eu.jll.com craig.plumb@eu.jll.com eman.hussein@eu.jll.com
@JLLMENA youtube.com/joneslanglasalle linkedin.com/companies/jll joneslanglasalleblog.com/EMEAResearch
jll-mena.com
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