• Residential rental rates increased by 25% in 6th of October and by 30% in New Cairo while average sale prices recorded an increase of 56% and 63%, respectively
  • Cairo sees a higher demand for high-quality co-working spaces in prime locations
  • Average retail rents across both primary and secondary malls increased by 11% and 9% for both segments annually

Cairo, Egypt:- The enduring appeal of Egypt’s capital city, with its spectacular historic and cultural sites, continues to drive global tourists into Cairo, resulting in an impressive performance for the hospitality sector in Q4 2023, according to JLL’s ‘A Year in Review’ report of the North African city’s real estate market. During the same period, the residential and office sectors in the Egyptian capital maintained resilience while the retail market, despite some significant challenges, injected a much-needed dynamism with the growth of homegrown fashion and F&B brands.

Although a temporary slowdown in GDP is expected during 2024 and 2025, given the country’s ongoing economic challenges including increased inflation, higher interest rates, foreign exchange (FX) shortages, and import constraints, Egypt's overall real estate industry has kept a positive momentum as it leverages the sector’s strengths to adapt and find opportunities for growth, says the new report.

Egypt’s tourism numbers, spiking at approximately 8 times higher than the global tourism rate of 4.5%, has been pivotal in stimulating overall growth. Between January and October 2023, Egypt registered around 13.9 million tourist arrivals, a nearly 36% increase compared to the same period last year. Incidentally, October 2023 witnessed the second highest number of tourist arrivals in Egypt since October 2010, welcoming around 1.3 million tourists (up by 8% compared to October 2022).

Ayman Sami, Country Head, JLL Egypt, said: “The rapidly growing tourist demand and increased spending on leisure and tourism infrastructure once again reaffirms the strong position of the hospitality market in Egypt, which is expected to continue to grow in the years ahead. Tourism is a key pillar of Egypt’s economy, and the announcement of numerous new projects in Cairo and other prominent Egyptian cities throughout 2023 is further fuelling the sturdy growth of the hospitality sector and leading to an upward momentum across other real estate segments.”

With the opening of Hilton’s Waldorf Astoria Heliopolis hotel in Q4, Cairo’s hotel stock saw the addition of around 250 keys in 2023, bringing the total hotel inventory to around 28,000 keys. The western area of the city registered increased greater interest compared to the east as global hotel operators began to expand their footprint with new project launches in 2023 to capitalise on the growth potential on the supply side. In 2024, more than 1,500 keys are anticipated to be delivered, predominantly in the 4 and 5-star hotel segment.

While the capital’s city-wide occupancy registered 70% for YT November 2023, reflecting an annual increase of around 100 basis points (bp), over the same period, average daily rates (ADR's) and revenue per available room (RevPAR's) decreased by around 7% and 6% respectively.

Resilience and strength in the residential sector

A total of 23,000 residential units were added in 2023, increasing the total stock to almost 268,000 units while around 33,000 units, predominantly apartments within mixed-use developments, are scheduled for completion in 2024.

Property owners in the secondary market further witnessed higher selling prices and rental rates, which surged significantly particularly during the fourth quarter of 2023.This surge came in line with both high inflationary pressures and active demand from buyers looking to hedge against inflation and devaluation. In the 6th of October and New Cairo, average sale prices in Q4 2023 increased by 56% and 63% while rental rates increased by 25% and 30%, respectively.

With potential currency devaluations and subsequent cost inflation expected to continue throughout 2024, developers are meticulously preparing and adjusting their off-plan sale prices to recoup losses and uphold healthy profit margins moving forward. As a result, sale prices in Cairo are expected to continue their upward trajectory in the short to medium term.

Opportunities arising within homegrown concepts despite slowdown in overall retail activity

Although 2023 was marked by limited project launches and completions with only 83,000 sq. m. of GLA being added to Cairo’s retail market, a five-fold increase is expected in 2024, with New Cairo taking up majority of the projected 447,000 sq. m. of scheduled completions, consisting primarily of community malls and mall expansions.

As consumer purchasing power tightens amid inflationary pressures, landlords are focusing on immediate profit generating concepts to alleviate and offset some of the losses of recent years and ease the pressure on retail spending in 2024. New opportunities are also emerging as high prices are prompting more affordable and high-quality home-grown fashion brands to expand beyond their e-commerce channels into mall-based retailing

Performance wise, average rental rates across primary and secondary malls remained stable on a quarterly basis in Q4 and increased annually by 11% and 9% for both segments, respectively. Meanwhile, the average vacancy rate dropped slightly from 10% in Q4 2022 to 9% in Q4 2023.

Steady demand for quality office spaces

Around 136,000 sq. m. of office space was delivered in 2023, bringing the total office stock to about 2 million sq. m. Moreover, nearly 570,000 sq. m. of office GLA is projected for 2024, primarily within the New Administrative Capital (NAC), closely followed by New Cairo and the west of the capital city.

Q4 2023 saw average city-wide office rents decrease by 3% to USD 362 per sq. m. per annum, compared to the same period in 2022. On the same basis, the average vacancy rate increased to 10% from 8% in Q4 2023.

Despite a slow start in 2023, the office market witnessed a modest resurgence in the second half of the year with increased inquiries and heightened occupier interest, especially for smaller office spaces. Within the New Cairo area, the demand is for higher quality offices with comprehensive fitouts.

The potential for co-working spaces has also been on the rise in Cairo and in 2023, global workspace provider IWG launched four new Regus centres as more players are looking to expand their footprint in the Egyptian capital in the year ahead.

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