Commenting on the report, Ian Albert, Regional Director at Collier International said: “Over the last four years we have seen a palpable change in investor appetite towards the Cairo real estate market. The infrastructure and real estate megaprojects driven by the government and international investors have undoubtedly had a positive impact on the economy. These projects have the potential to significantly change the economic landscape of Egypt, and yield additional benefits if managed effectively.”

The report provides a brief overview of three national mega projects: the Suez Canal Expansion, Cairo Airport City and New Capital City, all of which it anticipates will help drive demand for additional real estate products.

Key findings:

Residential

Demand for residential units in Greater Cairo is clearly delineated by income groups. On the one hand, wealthy Cairenes are increasingly relocating to New Cairo from central Cairo owing to ease of access and proximity to key services, while on the other hand, there is a growing need for mid-market properties that are affordable for the majority of residents.

Based on current trends, the report reveals a significant shortage of homes with over 500,000 new units needed by 2020. While government initiatives are addressing the shortage of economic housing for low income brackets and key developers are launching projects targeting high-income residents, there remains a significant gap in the market for units at the mid-income level.

  • In 2014, the total existing residential supply exceeded 5.2 million units
  • Average sales prices for apartments and villas increased by 27% and 64% respectively (2013-2015)
  • Average rental rates for apartments increased by 14% (2013-2015) and villa rentals dropped by 4% (2013-2105)

  Retail

The retail market landscape has witnessed a major transformation over the last decade supported by substantial economic and tax reforms. Consequently, consumer confidence increased notably, which triggered the interest of regional and international retailers to enter the market and capitalise on the large consumer base.

 

Prime shopping malls which offer an experience modelled on international retailing standards are operating at between 80% to full occupancy. The increasingly competitive landscape, however, has seen Grade B malls experiencing lower occupancy of up to 60%. Retail rents are expected to reflect occupancy levels, with average rents across established, well positioned shopping malls set to increase and maintain a premium over less competitive malls.

With generation X&Y Cairenes constituting over 50% of Cairo’s population, it is anticipated that primary grade lifestyle shopping malls with key retail components including F&B, dining and entertainment will attract high visitor volumes, occupancy rates and rentals compared to less competitive malls.

  • Currently, the demand for organized retail in Greater Cairo is estimated at 2.2 million m² GLA, and is expected to reach 2.4 million m² GLA by 2020
  • By end of 2015, the total organized retail supply in Greater Cairo is expected to reach 1.1 million m² GLA
  • An additional supply of 600,000 m² GLA is scheduled to come into the market over the next five years, provided construction timelines are met
  • The retail market is currently undersupplied by approximately 1.3 million m² GLA. The market is still expected to remain undersupplied by 1 million m² GLA by 2020
  • The average rental rates in key shopping malls range between US$408 per m² per annum and US$1,200 per m² per annum.

 Hospitality

One of the sectors where improved consumer confidence is most evident is the hospitality sector. The recent signings of international hotel brands, such as the Swissotel Katameya in Cairo, the DoubleTree by Hilton in Ain Al Sokhna, and the Westin Resort in Soma Bay demonstrate high levels of confidence among hotel investors interested in Egypt, which during the first half of 2015 reached its highest level in the last four years.

Colliers expects a 7.5% average annual increase in Cairo’s hospitality demand over the next five to ten year period in-line with Euromonitor’s tourism projections for Egypt. Given the growth in demand, it is anticipated that Cairo’s hotel market will need an additional 10,540 keys over and above the announced supply by 2025. This is being driven in part by domestic and regional corporate travel which accounted for 78% of total guest nights in the first half of 2015. However, it also takes into account the recent lifting of travels bans by traditional source markets, such as Germany.

  • Hotel demand has seen a notable shift towards eastern (New Cairo) and Western (6th of October City) Cairo in recent years
  • Internationally branded supply currently represents 64% of Cairo’s hotel market, of which 86% are 5-star rated

 Commercial

In the absence of a clearly defined Central Business District (CBD), Colliers points to the increasing prominence of New Cairo as a preferred area for local businesses looking for new office space owing to its location, infrastructure, ease of access, proximity to the Cairo International Airport, and the availability of supporting service.

Significant demand for premium office space is also a prominent segment trend, with high occupancy and rising rentals registered across Cairo’s limited Grade A office stock. Colliers anticipates that rentals will remain strong across developments offering international build quality in districts away from highly dense areas of the traditional city centre, while the market is expected to remain undersupplied in the short to medium term, with an additional 3.1 million m² NLA of new supply required by 2020.

Commercial

  • New Cairo and 6th of October City currently holds approximately 2 million m² NLA of Greater Cairo’s formal office supply
  • Based on Colliers research, more than 800,000 m² office space is expected to be completed between 2015 – 2018
  • Provided construction timelines are met, cumulative office supply is expected to reach approximately 2.3 million m² NLA over the next 5 years
  • Currently, formal office supply in Greater Cairo is witnessing a shortfall of approximately 2.7 million m² NLA
  • Despite nearly 800,000 m² NLA expected to come online between 2015 – 2020, the market still requires an additional 480,000 m² of formal office space to be delivered annually in order to meet market equilibrium by 2020
  • Average rental rates of office space in key areas within Greater Cairo range between US$300 per m² per annum and US$350 per m² per annum.
The overall market witnessed an average rental growth of 6% during 2014 – 2015, underpinned by the limited primary grade