In Cairo, Egypt, the real estate landscape is growing in some areas and slowing in others; here is an overview of recent developments.

1. What to Watch for in the Cairo
Property Market
Ehsan Bayat

2. What to Watch for in the Cairo Property Market
Real estate investors and developers in Egypt are seeing the effects of a diminishing Egyptian Pound (EGP),
and they await action on several proposed measures of regulatory legislation from the government. The
latter variable will most directly impact the New Cairo Capital City project - estimated to create housing for
as many as 5 million residents - as progress depends on instituting reforms that attract foreign investors.
In terms of the lowered EGP value, residential and hospitality development should prosper in the coming
months, but the office and retail sectors are expected to experience a downturn. Each category of real estate,
however, will take a hit from increased import prices, manifested in higher construction costs and similar
expenditures. For a more detailed look at the 2016 market behavior in Cairo, Egypt, here are some insights
from recent JLL reports.

3. Residential Market Performance
During the first fiscal quarter of 2016, a total of 600 residential units entered the market. Waterway and
Mivida, both located in the New Cairo project, were among the main developments to complete new homes.
Within the residential sector, apartments proved to be the most profitable type of property, and they
accounted for the most completed units. Demand for these newly-built properties resulted in a 4 percent
increase in prices.

4. Residential Market Performance (continued)
At the other end of the spectrum, villas performed poorly, particularly in the 6th October and New Cairo
areas. Prices for these types of properties declined as a whole in the region.
Rental statistics for residential real estate mirror those of purchased properties, with an increase in
apartment rates and a decrease for villas. Average rent prices of villas fell by as much as 10 percent during
Q1.
Looking forward, the residential market is slated to expand by 656,000 units, including those built as part of
phase one of New Cairo Capital City, by April 2017.

5. Outlook for the Hotel Industry
Q1 remained stagnant in Cairo as far as hotel completions are concerned. Construction of new facilities
continued at a slow pace, but the new St. Regis Cairo should open by the end of 2016. The hotel will be
located in the downtown area of the capital city, and it will add to the 1,300 rooms expected to be finished
this year.
The average daily rate paid by patrons decreased slightly (roughly 2 percent) in comparison to Q1 of 2015.
This shift comes as occupancy rates increased marginally to stand at 57 percent. Possible explanations for
the lower numbers at the start of the year include recent incidents in the area that have dissuaded travelers.
However, changes in airport security detail are anticipated to help bring more visitors to Cairo. The other
current upside is that the lowered EGP value should make the area more competitive for tourist dollars.
Additionally, the Ministry of Tourism has launched new efforts to attract visitors.

6. Office Space and Leasing Overview
The only significant change in office real estate in Q1 was the finished Citadel Plaza
(20,000 square meters in size), located in the Mokattam Area. With this addition,
the number of square meters available in Cairo now totals 941,000.
Compared to the same time period in 2015, the demand for Grade A office space has
remained consistent. Activity in leasing has slowed down, but the contracts that
were signed have brought down the overall vacancy percentage. As of Q1 2016, 71
percent of office spaces had a tenant. This number is up from 67 percent in 2015.

7. Office Space and Leasing Overview (continued)
EGP rates have left many tenants unable to pay with U.S. dollars, but rental prices
remained balanced during the first quarter. New Cairo Sector 1 was the singular
area where prices changed, and they dropped by roughly 4 percent.
According to the rental cycle published by JLL, the office sector moved from
“accelerating” in 2015 to right between “slowing” and “falling” in 2016. The step
after “falling” is “bottoming out,” which generally precedes another period of
acceleration.

8. Summary of Retail Market Updates
At the beginning of the year, two retail projects were expected to open in 2016, but only one will do so. The
Capital Mall in Heliopolis is on schedule for completion by the end of the year. Once open, it will add 45,000
square meters of retail gross leasable area to the existing 1.3 million. Various delays have placed the earliest
completion date for the Mall of Egypt sometime in 2017.
Comparing the first quarters of 2015 and 2016, the percentage of property with tenants decreased from 86
to 83 percent. The average rental rate did not move.
Consumers in Cairo have experienced a drop in disposable income, and this has affected the type of tenants
for which commercial real estate owners are searching. With the economy in its current position, tenants
with value brands - rather than those selling luxury goods - have gained the upper hand in securing lease
space.