East Cairo real estate prices expected to continue increasing in 2015: Report

As government announces new projects, including new capital, Al-Mostakbal City, Palm Hills, and MHND joint project, there is growth in real estate activity types

A report issued by Jones Lang LaSalle (JLL) on the Cairo real estate market anticipated that residence prices will continue increasing in New Cairo.
The increase comes in light of several major projects, including: the new capital; Al-Mostakbal City; Palm Hills; the Madinet Nasr for Housing and Development's (MNHD) joint project; and the government initiatives aiming to support the development of the suburbs of eastern Cairo.
The report by the real estate investments and consultancy company mentioned that the same thing does not apply to western Cairo, which is unlikely to witness such a strong increase in prices.
The available office spaces in Cairo remained unchanged, at 919,000 sqm of the total area available for rent in the second quarter (Q2) of 2015, according to the report. Vacancy rates have also witnessed an increase over 2014, but remained relatively stable at 33% over Q2 of 2015.
Office rentals in Downtown Cairo have witnessed a huge decline, the report added, as they have reduced to less than $30 per sqm per month, as most demand shifted towards the affiliated cities, especially in New Cairo.
"Rentals in the major suburb markets in New Cairo and western Cairo remained unchanged over Q2 of this year," the report said.
New Cairo (Sector 1) had the best performance over the last year, with rentals increasing by 22% compared to Q2 of 2014, according to the report. It also mentioned that, since Sector 1 has become more crowded, demand has moved to Sectors 2 and 3, in light of their competitive prices and the availability of parking space.
As for the residence segment, four developmental projects of this kind were completed, adding 2,000 housing units to the ones already displayed, over Q2, the report added. These developmental projects included the surroundings area, extending to Palm Hills, El-Rehab 2, and Kattameya Gardens in New Cairo.
The report also showed that 28,000 additional units are expected to be completed over the second half (H2) of 2015. The majority of these units are located in 6th of October City. The report added that several of these projects are likely to be delayed until 2016 and 2017.
The report also showed that the current vacancy rates in retail sale centres remained unchanged, on a quarter annual bases. However, they decreased significantly over 2014, as the market accommodated about 40,000 sqm areas available for rental over the past year.
The decline in vacancy rates led to the continuous increase of rentals, as the rentals of privileged areas of the commercial shops increased by 5% over one quarter, and by 13% over the whole year. New residential real estate projects have been completed in Q2, with Bandar Mall and Capital Mall scheduled for completion by Q4 of 2015. The large-scale mall of Madinaty, as well as Citadel Plaza, has been postponed until 2016.
As for the hotel sector, the report stated that new hotels were delivered during Q2 of 2015. The re-opening of the 331-room Nile Ritz Carlton Hotel is scheduled for September, and will be followed by the 292 rooms at the St Regis Hotel Cairo later in 2015, according to the report. Hotel occupancy rates have fluctuated in Cairo since 2013.
The occupancy rate of 55% recorded from the beginning of the year until May 2015 represents a huge increase from the 38% rate recorded in the same period last year, according to the report.
The financial performance of hotels Cairo has risen less rapidly than occupancy rate, where the average daily performance between the beginning of 2015 to May was only 3% of the rate witnessed during the same period of 2014.
All of Cairo's real estate sectors have witnessed positive growth and performance improvement during Q2 of 2015, according to Ayman Sami, Head of JLL Middle East and North Africa.
Sami said Egypt received more investment from Saudi Arabia and the UAE since the Economic Summit, held in Sharm El-Sheikh in March 2015.
The flow of GCC investments to Egypt, according to Sami, led to the International Monetary Fund's (IMF) amendments of its forecast for Egypt during 2015 and 2016, where it raised its GDP growth rate forecast to 4% in 2015 and 4.4% in 2016.
"In the areas of retail real estate due for completion during the 18 coming months exceeding 770,000 sqm, we expect the vacancies rates to increase, thus, limiting the prospects of additional increase of rents," said Sami.
He added that, under the government's recognition of the importance of the tourism sector to the Egyptian economy, the Ministry of Civil Aviation plans to cut aviation fees at four airports, notably Luxor, Aswan, Marsa Matruh, and Taba. This comes at the same time as the Ministry of Tourism's launching of a huge marketing campaign abroad. He noted that collectively, the hotel segment should make more profit.
The level of the supply of real estate offices in Cairo have has remained unchanged during the Q2 of 2015.