15 May 2012 (62 Pages)
Includes 3 FREE Quarterly Updates.
The Egypt Real Estate report examines the Commercial Office, Retail and Industrial segments in the context of a market, which in spite of its long-term potential, continues to be susceptible to instability and which will be characterised by the aftershocks of the Arab spring in the short- to medium term.
With a focus on the principal areas of Cairo, New Cairo, 6th of October City and Giza, the report covers the rental market performance in terms of rates and yields over the past 18 months. The report also examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the effect of a stalled pipeline on a market, which until the events of early 2011 held so much potential. The key risks and opportunities driven by domestic and regional investor activism, combined with the future potential of the domestic consumer market, are also explored; with macroeconomic fundamentals and political developments underpinning short-term industry sentiment and performance.
We see little prospect for a swift economic recovery in Egypt in 2012. Although we remain bullish in the long-term, our full-year 2011 data has started to reveal the tangible effects of Egypt’s uneasy political transition on the commercial real estate market, with retail space suffering particularly from the country’s volatility. We expect rents to stabilise over the coming quarters, but beyond the trend of increasing rental divergence, the return to pre-Arab Spring rental rates will be a gradual process.
- High quality space across the three sub-sectors is forecast to outperform due to a shortage of new supply and client desire to reduce the risk profile of their businesses wherever possible.
- We expect growth to remain anaemic through end-FY2011/12, with investment not picking up until after the conclusion of presidential elections in late June. The vote should provide a degree of clarity over the country's future political trajectory and policy climate.
- The political environment will remain volatile and we remain cautious of the risks of missing the broader picture. We have little indication that an era of renewed stability will emerge in the short term, regardless of any pending court verdict regarding the legitimacy of the constitution.
- With the political backdrop likely to remain volatile over the coming quarters, growth momentum will fail to gather much steam. Real GDP is forecast to expand 2.1% in 2012, which is up only marginally on the 1.8% rate of growth posted in 2011.
- We have become decidedly more bearish on the outlook for the Egyptian pound. With reserves rapidly declining, we expect a devaluation to EGP7.0000/US$ in the first instance.
- Our interest rate forecasts have been revised. We are projecting the benchmark lending rate to be raised to 11.00% by end-2012, from 10.25% currently.