Q Cairo Real Estate Market Overview

Transcription

1 Cairo Real Estate Market Overview

2 Cairo Market Summary All sectors of the Cairo real estate market continued to exhibit positive performance and improved sentiment during. The Egypt Economic Development Conference hosted in March has resulted in approximately USD 125 billion of investments in Egypt, coming mainly from Saudi Arabia and the United Arab Emirates. These investments have contributed to positive economic sentiment, with the IMF upgrading their forecasts for real GDP growth for 2015 and 2016 to 4.0% and 4.4% respectively. While there have been delays to the political roadmap and continued opposition from some sectors, the government has been generally successful at maintaining stability and security throughout the country. This has played a major role in the increased rate of economic growth currently experienced and has also benefitted the real estate sector. The hotel sector has performed particularly well over the past quarter, but there has also been growth in rentals across parts of the office, residential and retail markets which all remain in the upturn sector of their rental cycle. Cairo Prime Rental Clock Q2 Q Rental Growth Slowing Rents Falling Retail Rental Growth Slowing Rents Falling Rental Growth Accelerating Rents Bottoming Out Residential Hotel* Rental Growth Accelerating Rents Bottoming Out Residential Hotel* Retail Office Office * Hotel clock reflects the movement of RevPAR Note: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily representative of investment or development market prospects. It is important to recognise that markets move at different speeds depending on their maturity, size and economic conditions. Markets will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods. Source: JLL

3 Cairo Office Market Overview Market Summary Cairo s office supply remained unchanged at 919,000 sq m GLA as of Q2. While vacancy rates have trended up over the past year, they remained relatively stable over the quarter at 33%. Office rents in Central Cairo witnessed a significant decrease in Q2, falling to USD30 per sq m per month, as the majority of demand remains focussed on the satellite cities, especially New Cairo. This is attributed to the availability of better infrastructure, accessibility and parking. Rents in the major suburban markets of New Cairo and West Cairo remained unchanged over the quarter. The stand out performer over the past year has been New Cairo (Sector 2), where rents have increased by 22% in comparison to Q2. Since sector 1 has become more congested, demand has shifted to sectors 2 and 3 given their competitive pricing and the availability of parking. Hot Topic Project delays subdue future supply levels. All the projects scheduled to complete in Q2 have been delayed (these include Summit 75 and Landmark II). While these projects are currently scheduled to complete later this year, it is quite likely they will be delayed further until There remain a large number of planned and potential office projects in the pipeline, but these are unlikely to be commenced without significant levels of tenant pre commitment. The medium term supply outlook remains relatively subdued, with just 87,000 sq m of new supply scheduled by the end of Most of this new supply is located in New Cairo (Sectors 2 and 3) which is witnessing higher demand given its better infrastructure and parking facilities, and more competitive pricing than Sector 1. Office Supply 773K Current Supply (2012 ) 819K 904K 919K 37K Future Supply ( ) 0K 50K M Office Performance Vacancy Rate 25% 33% Q2 USD Cairo Rents (USD per sq m p.a) / Annual Change Q2 Q22015 Y-o-Y Central Cairo % New Cairo (S1) % New Cairo (S2) % West Cairo %

4 Cairo Residential Market Overview Market Summary Four developments were completed across the residential market in Q2, adding an extra 2,000 units to the residential supply. These developments included Jiwar and the Palm Hills Extension, Rehab 2 and Village Gardens Katameya all located in New Cairo. An additional 28,000 units are due for completion during the second half of However many of these projects are likely to be delayed into 2016 and 2017, which currently have low levels of scheduled residential completions. The majority of these are located in 6th of October. Hot Topic The rental market continues to perform more strongly than the sales market across most locations, registering a 10% Q- o-q climb across all areas (with the exception of apartments in New Cairo). Apartment sale prices increased marginally in New Cairo but declined in locations monitored by JLL in 6th of October during. Prices are expected to continue rising in New Cairo, on the back of major new announcements (New Capital Cairo, Future City, Palm Hills and MNHD joint venture) and government initiatives to further develop East Cairo. This however may not apply to 6th of October and other areas to the west of the city. Residential Supply Current Supply (2012 ) Future Supply ( ) 74K 85K 105K 108K 28K 15K 3K M Residential Performance Residential Rent and Sale Prices Apartment residential New Cairo 1% -3% 6th October -2% 10% Villa residential New Cairo 0% 9% 6th October -2% 10% Q-o-Q Q-o-Q 8% 8% 26% 8% -7% 6% 23% 7% Y-o-Y Y-o-Y

5 Cairo Retail Market Overview Market Summary Vacancy rates in existing retail malls remained largely unchanged on a quarterly basis to Q2, but have recoded a significant decline over the year as the market absorbed much of the 40,000 sq m of GLA completed over the past 12 months. The decline in vacancies has resulted in continued rental growth, with Prime rents for line stores increasing by 5% over the quarter and by 13% Y-o-Y. There were no retail malls completed in Q2, with Bandar Mall and Capital Mall now both scheduled to complete in Q4 2015, and Madinaty Mega Mall and Citadel Plaza postponed until Hot Topics Delays to retail developments expected for completion in Q Two of the developments, Bandar Mall and Capital Mall, that were planned for completion in Q2 are currently postponed to Q4, in addition to Madinaty Mega Mall and Citadel Plaza that are also postponed to Q New supply to exert downward pressure on retail rentals. With over 770,000 sq m of retail floor space scheduled to complete over the next 18 months, vacancy rates are expected to increase from their current levels. Rental rates are expected to stagnate given the introduction of new supply in the near future. Retail Supply Current Supply (2012 ) Future Supply ( ) 836K 1.1M 1.2M 1.2M 147K 627K 43K M Retail Performance Vacancy Rate 29% 17% Q2 USD Prime Retail Rents (per sq m) / Annual change 1,400 Q2 1,600 13% Y-o-Y 2015 /2016

6 Cairo Hotel Market Overview Market Summary No new hotels were delivered in Q2 as the reopening of the Nile Ritz Carlton (331 keys) is now scheduled for September, followed by the St. Regis Cairo (292 keys) later in Hotel occupancy rates have been fluctuating in Cairo since The 55% recorded over the year to May 2015, represents a marginal improvement on the 53% recorded in Q and a significant improvement on the 38% recorded in the year to May. The financial performance of Cairo hotels has improved less rapidly than the occupancy rate, with the average daily rate (ADR) in the year to May 2015 increasing by just 3% from that witnessed during the same period of. Hot Topic Further recovery in hotels sector during the rest of The Government recognizes the importance of the tourism industry to the Egyptian economy, and Prime Minister Ibrahim Mehleb has recently restructured the Supreme Council of Tourism to improve its performance. The Ministry of Civil Aviation is planning to reduce aviation fees at four airports (Luxor, Aswan, Marsa Matrouh and Taba) to boost tourism levels. At the same time, Egypt has embarked upon a major advertising campaign in its major overseas source markets. Providing that security can be maintained, the Cairo hotel market is likely to benefit from these initiatives and the overall recovery of the Egyptian economy in 2015 / Hotel Supply Current Supply (2013 ) Future Supply ( ) 27,500 keys 27,700 27,700 27, M Hotel Performance Occupancy Rate 38% 55% YT May YT May 2015 USD 101 YT May Average Daily Rate / Annual Change 104 YT May % Y-o-Y Source : STR Global Source : STR Global

7 Definitions and Methodology Interpretation of market positions: 6 o clock indicates a turning point towards rental growth. At this position, we believe the market has reached its lowest point and the next movement in rents is likely to be upwards. 9 o clock indicates the market has reached the rental growth peak, while rents may continue to increase over coming quarters the market is heading towards a period of rental stabilisation. 12 o clock indicates a turning point towards a market consolidation / slowdown. At this position, the market has no further rental growth potential left in the current cycle, with the next move likely to be downwards. 3 o clock indicates the market has reached its point of fastest decline. While rents may continue to decline for some time, the rate of decrease is expected to slow as the market moves towards a period of rental stabilisation. The supply data is based on our quarterly survey of 100 projects located in New Cairo and 6th of October, starting from Completed building refers to a building that is handed over for immediate occupation. Residential performance data is based on two separate baskets of projects, one for rentals and the other for sales of villas and apartments. The rental performance is based on 3 bedroom villas and 2 bedroom apartments The sales data relates to fully finished units, rather than those handed over in a shell and core condition. The supply data is based on our quarterly survey of the Grade A office space located in Downtown, New Cairo and West Cairo. The historic supply data has been revised since the Q2 report to reflect updated information. Completed building refers to a building that is handed over for immediate occupation. Prime Office Rent represents the top open-market rent (exclusive of service charge, tenant incentives & local taxes) that could be expected for a notional office unit of the highest quality and specification in the best location in a market, at the survey date. Vacancy rate is based on estimates from the JLL Agency team for a basket of leading office buildings. This basket represents around 86% of the current supply to quality office space in Cairo. Classification of Retail Centres is based upon the ULI definition and based on their GLA: Super Regional Malls have a GLA of above 90,000 sq m Regional Malls have a GLA of 30,000-90,000 sq m Community Malls have a GLA of 10,000-30,000 sq m Neighborhood Malls have a GLA of 3,000-10,000 sq m Convenience Malls have a GLA of less than 3,000 sq m Prime Rent represents the quoted rent for top end line stores within the top 5 super regional and regional malls in greater Cairo. Vacancy rate is based on estimates from the JLL Retail team, and represents the average rate across standard in line unit shops at regional malls Hotel room supply is based on existing supply figures provided by the Egyptian Hotel Association as well as future hotel development data tracked by JLL Hotels. Room supply includes all graded hotel supply and excludes serviced apartments. STR performance data is based on a sample of internationally branded midscale and upscale hotel properties.

8 Cairo Star Capital 2 8th Floor, Office 86 2 Aly Rashed Street Heliopolis Cairo, Egypt Tel: Fax: For questions and inquires about the Cairo real estate market, please contact: Ayman Sami Country Head Egypt ayman.sami@eu.jll.com Dana Williamson Head of Agency MENA dana.williamson@eu.jll.com Andrew Williamson Head of Retail MENA andrew.williamson@eu.jll.com Chiheb Ben-Mahmoud Head of Hotels & Hospitality MEA chiheb.ben-mahmoud@eu.jll.com Craig Plumb Head of Research MENA craig.plumb@eu.jll.com Eman Hussein Research Manager MENA youtube.com/joneslanglasalle linkedin.com/companies/jll joneslanglasalleblog.com/emearesearch jll-mena.com This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of JLL IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. JLL does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.