BMI View: Egypt is only just beginning to recover from the political instability seen in the country over the previous three years. On top of this, regional violence and strife have added a further deterrent to would be investors. Instability is also keeping away tourists, negating one of the most powerful drivers of the Egyptian economy. Nevertheless, holding an important position within regional culture and with demographic trends on its side, the country's economy continues to move forward, and there are many signs that the real estate market may be turning a corner.
Political upheaval, first the overthrow of long-time dictator Hosni Mubarak in 2011, followed by the removal of the democratically elected president Mohamed Morsi, has led to economic stagnation and flight of foreign capital. In recent quarters the government has done much to reassure investors of the stability of Egyptian investments, such as the announcement that foreign oil companies would be paid all monies owed then though a EGP10bn loan secured by the national oil company.
Although 2014 has been a relatively stable year for post-revolution Egypt, the same cannot be said for the wider Middle Eastern region. Fighting has continued in Syria, while a new sectarian thread has emerged in Iraq in the form of the Islamic State (IS). Saudi Arabia was rocked by a terror attack against a Shi'ite religious gathering. At the same time a dramatic drop in the price of oil has made many Middle Eastern economies more vulnerable and less dynamic, further reducing incentives for foreign investors.
Nevertheless, there are signs that foreign direct investment is cautiously turning towards the Egyptian real estate sector once more. A number of Egyptian real estate developers have reported significant year-on-year rises in profits and revenue. Egyptian developer SODIC saw its market capitalisation reach a new high for the first time since the revolution after posting a 14% rise in y-o-y profit in Q2 2014.
One reason investors are anticipating rising property values is due to rising inflation expectations. Another cause to be positive on the sector is the basic demographics in Egypt. The country has very young population, with many young adults expected to enter the work force and start families over the coming decade. The country is experiencing rapid urbanisation, but still has a relatively large rural population that has yet to embrace an urban lifestyle.
Another trend driving property developments is the migration of many Egyptians out of Cairo's city centre and into the outskirts and suburbs of the city. This is fuelling rapid development of commercial and retail real estate in these cities to meet the needs of new residents, in addition to the residential development required to house them.
SODIC has estimated the value of its 2014 investments at EGP2.5bn, and announced plans to invest a further EGP2.4bn in 2015. The company's managing director is quoted as saying he sees the beginning of a strong recovery in the real estate market, and is actively looking for new projects. The company's planned projects include a GBP310mn mall in Mansoura and a new 1.3 million square metre project in the Cairo suburb of Heliopolis, set to begin construction at the end of 2014.
E-Finance announced that its new EGP70mn, 6,000 square metre headquarters, under construction in Smart Village in the outskirts of 6th of October City, should be finished in May 2015.
The retail space market in Cairo saw several new offerings come online. The Galleria 40 in West Cairo opened its doors in Q3. Leased units there are currently dominated by foreign firms and the Food and Beverage sector. A further 364,000 sq m of retail space was scheduled for completion over the final quarter of 2014, including two super regional malls: Citadel Plaza in Mokattam and Madinaty Mega Mall in New Cairo.
Key BMI Forecasts:
We forecast rents for office space in New Cairo will remain flat in 2015, but will likely increase 5% in 2016.
We forecast rents for Retail space will remain stagnant across Egypt over 2015.
We forecast rents for Industrial space remain stagnant in all cities over 2015.
We forecast yields for office space to be highest in Giza, at 5-12% in 2015.
We forecast yields for retail space to be 5-8% in Cairo and 6 th of October city, and 5-10% in Giza and New Cairo, in 2015.
We forecast yields for industrial space to 5% in Cairo in 2015.
The Egypt Real Estate Report features BMI Research's market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.
BMI's Egypt Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in Egypt.
- Benchmark BMI's independent real estate industry forecasts for Egypt to test other views - a key input for successful budgeting and strategic business planning in the Egyptian real estate market.
- Target business opportunities and risks in Egypt through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
- Assess the activities, strategy and market position of your competitors, partners and clients via our company profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering real estate and construction, regulatory changes, major investments and projects and significant national and multinational company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the real estate sector and within the broader political, financial, economic and business environment.
Industry Forecasts Outlook
Historic data series (2010-2013) and forecasts to end-2019 for the domestic real estate industry and for the local and global finance industry.
- Real Estate: Office, retail and industrial real estate yields for all major cities (%); short term forecasts on minimum and maximum real estate rental prices by sub-sector (USD per square metre and local currency per square metre).
- Construction: Industry value (USDbn); contribution to GDP (%); employment (‘000); real growth (%).
- economy: Economic growth (%); nominal GDP (USDbn); unemployment (%); interest rates (%); exchange rate (against USD).
BMI’s Real Estate Risk Reward Index
BMI’s Risk Reward Indices provide investors (real estate vendors, construction companies and financial investors) looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide an indices of highest to lowest appeal to investors, with each position explained.
Overview of the real estate sector, including analysis of existing/planned real estate developments and emerging industry trends in the office, industrial and commercial sectors
Features detailed city-level data and analysis on rental prices, yields, contract terms and real estate availability with separate chapters covering the office, retail and industrial sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.