Real estate continues to be the investment of choice as a means of safety and security against the current economic challenges brought by currency devaluation, increased inflation, higher interest rates, foreign exchange (FX) shortages, and import constraints. Although the pace might be uneven across sectors, investment transaction activity is set to rise in the coming years once the economy begins its gradual recovery, stabilizing the market and increasing predictability in interest rates and debt markets.
Despite current macroeconomic challenges impacting the pace of activity in Egypt’s real estate sector, easing of inflationary pressures will shape recovery in real estate transactions and asset values, demonstrating the industry’s long-term adaptability and resilience, highlighted a panel of experts at JLL’s ‘Resilience Reframed – Capitalising on Egypt’s Real Estate Opportunities’ event in Cairo.
Industry sources and JLL Experts added that during the ‘Resilience Reframed – Capitalising on Egypt’s Real Estate Opportunities’ symposium, JLL’s executive bench further offered an optimistic overview of the industry underlining how rising tourist demand and increased spending on leisure and tourism infrastructure have led to impressive gains in the hospitality market, especially in the luxury segment, which has reached almost record levels in terms of occupancy.
Further, they added that more than 1,500 keys are anticipated to be delivered in 2024 with new project launches across Cairo, predominantly in the 4 and 5-star hotel segment. Tourism, a key pillar of Egypt’s economy, continues to stimulate overall growth as it welcomed a record high of 14.9 million tourists in 2023, surpassing the previous 2010 record of 14.7 million visitors.
Industry sources added that the high momentum of growth in the luxury hospitality segment, coupled with strong demand in the residential sector and numerous project announcements to meet evolving market needs, present a compelling prospect for stakeholders aiming to capitalize on real estate opportunities in Egypt, said the industry analysts.
Industry sources also added that in the face of uncertainty, JLL experts advised adopting alternative strategies to construct a diversified real estate portfolio aimed at generating recurring income and mitigating risks. Navigating through sector diversification demands agility, creativity, and time, but promising opportunities lie in undersupplied resilient segments such as healthcare, logistics, and education. Additionally, the high-income growth sector of hospitality also presents alluring prospects for those willing to adapt and explore new avenues.
James Allan, CEO, of Middle East and Africa (MEA), JLL, stated: “Despite inflationary pressures and devaluation of the local currency, Egypt’s real estate industry maintains its dynamism and growth potential. Real estate continues to be a secure investment, serving as a hedge against current challenges. The expected introduction of new quality offerings in the medium-to-long term, combined with a robust appetite for real estate investment, further emphasizes the market’s strength. As Egypt moves towards a more favorable economic and investment landscape, stakeholders like developers, occupiers, and investors can anticipate ample first-mover advantages. However, innovative approaches will continue to be pivotal in realizing substantial returns for all involved.”
Ayman Sami, Country Head, JLL Egypt, stated: “Egypt’s inflationary environment is enabling investors and leading market players to leverage new opportunities for accelerating growth. Investments in high-demand sectors and diversifying portfolios encompassing a mix of traditional and sustainable assets will be key to ensuring a consistent trajectory in a rapidly evolving real estate market. Embracing adaptability and agility in their strategies will enable investors to capitalize on emerging trends and reap returns when the market stabilizes.”
Industry experts and sources confirmed that to create value and unlock the potential of each asset, the stalwarts also pointed out the need to account for social and environmental impact alongside financial returns. Adopting diverse sustainability strategies is crucial for building resilient communities. Given the challenges of high material costs in Egypt’s construction market, JLL urged stakeholders to budget for inflation, closely monitor costs, and explore alternative pathways like prefabrication or digital solutions for accelerated construction, ensuring timely delivery.
The residential sector is expected to maintain its robustness with the completion of 33,000 units, predominantly apartments within mixed-use developments in 2024. Attracting both second-home buyers and investors, the sector saw average sale prices and rental rates significantly increase in Q4 2023 for both 6th of October and New Cairo.
When it comes to the office sector, the outsourcing market continues to lead demand. Moreover, the sector is also witnessing a heightened occupier interest in smaller office spaces and greater demand for co-working spaces, especially in Cairo, while international entities are considering the move to higher-quality offices primarily within the New Cairo area.
The current slowdown in overall retail activity is poised for a transformative change with a five-fold increase expected in 2024, with New Cairo taking up the majority of the projected 447,000 sq. m. of scheduled completions, consisting primarily of community malls and mall expansions.
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