Egypt’s office, retail space demand sees growth in 2023 despite challenges: Report

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Mon, 15 May 2023 - 02:24 GMT

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Mon, 15 May 2023 - 02:24 GMT

Egypt Real Estate Report - Savills

Egypt Real Estate Report - Savills

CAIRO - 15 May 2023: Egypt Real Estate Report, issued by Savills Egypt, highlighted the challenges the industry has faced over the past year, how they affected the different stakeholders and how they’re responding to the changing market.
 
The report, which focuses on the retail and office sectors, said that the retail market was naturally impacted by the global supply chain bottlenecks, import restrictions, local currency devaluation, widespread inflation, and spillover effects from the Russian-Ukrainian conflict. 
 
“However, the F&B sector has observed a rise in new local brands that provide creative experiential dining and take-out concepts. Several international F&B brands, especially from Europe have made their way to the Egyptian market as well,” it added. 
 
Savills Egypt's report also revealed that the current market dynamics favor retailers and F&B operators, allowing more room for negotiations with landlords, who have started offering flexible and generous lease terms. To ensure that sizable developments are fully leased and well-perceived within the market, landlords have begun incorporating prelease agreements with international groups, retailers, and operators.
 
"The global retail industry has faced unprecedented challenges over the past year, but Egypt still has significant potential for growth and development. The Egyptian retail industry remains at an early developmental stage and is highly underserved in terms of experiential retail concepts, entertainment options, and the limited presence and diversity of international brands. There are also clear opportunities for the sector due to Egypt’s young demographic. Retailers must adapt their offerings to better serve Generation Z as this consumer segment is eager to remain up to date with global fashion movements and are more inclined to shop at physical stores with technology-enhanced shopping experiences,” explained Sherine Badreldine, Head of Operations, Savills Egypt.
 
Retail
The average retail rental rates in Greater Cairo stand at LE 940 per square meter (sqm) per month with 85 percent occupancy rate. In West Greater Cairo the retail rent averages LE 820 sqm per month with 79 percent occupancy rate, in Central Cairo the average is LE 900 per sqm per month with a 90 percent occupancy rate, while in East Greater Cairo the average is LE1,020 sqm per month with 88 percent occupancy rate.  
 
retail 2
 
As for the office market trends 2022 - 2023, the report noted that the gradual flotation of the Egyptian pound, and subsequent inflation levels have led tenants to rush to complete fit-out work in leased office spaces, triggered by the anticipated price increases and limited availability of raw materials due to recent import restrictions.  
 
Capitalizing on this, landlords are now offering more flexible lease models and many prominent landlords have shifted back to leasing office space in the dollar instead of the Egyptian pound to counteract the effect of monetary depreciation.
 
“Office spaces within the 200-500 sqm range are notably high in demand from international tenants that have adopted hybrid working practices and therefore need smaller spaces,” said Catesby Langer-Paget, Head of Savills Egypt. 
 
“On a similar note, startups implementing the ‘work from anywhere model’ have realized they do not need much space to operate, fueling greater demand for serviced offices and co-working spaces across Greater Cairo. This operational model has proven highly attractive as it provides flexible and reduced rental fees, in addition to alleviating the operating hassle of maintaining the space,” he added.   
 
office
 
According to the Savills Egypt report, the average office rental rates in greater Cairo averages LE 760 per sqm per month with 81 percent occupancy rate, yet the rates vary from one district to the other. West Greater Cairo averages LE 660 per sqm per month with an 80 percent occupancy rate, Central Cairo averages LE 740 per sqm per month with a 68 percent occupancy rate, while East Greater Cairo averages LE 840 per sqm per month with a 90 percent occupancy rate.
 
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It added that Egypt's real estate market is steadily becoming more affordable for foreign investors in USD terms, making it an attractive prospect. However, certain adjustments need to be put in place to incentivize them further. Firstly, ensuring currency stability will give investors confidence that their purchase will appreciate over time. Secondly, creating a better legal and commercial framework will make the purchasing process smoother and more transparent. Additionally, streamlining registration mechanisms will help reduce any hurdles that might discourage potential investors. These changes will be crucial in making Egypt's real estate sector more appealing to foreign investors.
 
Moreover, large corporations are continuing the sustainability momentum of 2022 throughout 2023 working towards attaining sustainable, green office spaces. Certified projects meet ESG goals by tackling decarbonization, improving building efficiency, maximizing utilities savings, and creating healthy atmospheres for occupiers focused on wellbeing and social added value. It is expected that there will be an increased focus on repurposing existing stock to meet ESG requirements of tenants. 
 
As a result, office developments offering collaborative spaces, fully integrated and automated BMS systems, good ventilation systems and amenities will be in high demand, according to the report.
 

 

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