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Cairo property market shows signs of recovery

on Oct 24, 2012

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Cairo's property market is beginning to stabilise after a turbulent period following the Arab Spring, according to new research from Jones Lang LaSalle (JLL).

Although rents for both residential and office space have continued to fall, the firm says that a stabilising economy - supported by loans from Qatar and pledged cash from the International Monetary Fund - is helping confidence to return in the country.

It pointed to recent announcements by UAE developers Emaar and Al-Futtaim Properties proposing an $830m Cairo Gate entertainment complex on the Cairo-Alexandria desert highway and Amer Group's announcement of $388m worth of real estate sales as examples of this.

Egypt's new government has targeted nominal growth of 4-5% this year, which requires around $45m in investment.

In the office market, Grade A rents continued to fall to $40 per m2 in central Cairo and $20-25 per m2 in New Cairo during the third quarter, despite the fact that no new stock came onto the market during the quarter.

Although vacancy rates in prime office buildings dropped by 7% to 31%, some 196,000m2 is expected to be added to the current 744,000 m2 of space within the next year or so, placing further pressure on rents.

"Leasing incentives such as rent free periods, landlord contributions to fit out and the provision of additional parking slots, are expected to increase across all building grades, causing net effective rentals to decline," the report said. "It is anticipated that secondary / lower quality buildings will be hardest hit when forced to compete with the new product introduced into the market over the next year."

Similarly, rents for residential properties have also continued to fall, although some areas have fared better than others. Average rents for an apartment in New Cairo have remained steady at around $967 per m2, while the average villa rent dropped by 2.6% to $2,667 per month.

Rents in 6th October City fell by 4% for apartments ($850 per month) and 1.3% for villas ($2,500 per months).

JLL said that capital values are edging upwards, though.

"The residential sector is witnessing restored confidence and an increase in demand. Responding to this improvement, a number of developers have launched new phases of several projects across Cairo," it said.