Market Reports

Q3 Sees Boost in Egyptian Hotel and Tourism Sector

Investor interest restores confidence in Cairo’s real estate market
The Pyramids in Egypt - Photo by Les Anderson on Unsplash
Q3 Sees Boost in Egyptian Hotel and Tourism Sector


While conditions remain challenging across Cairo's real estate market, elevated interest from major investors and developers coupled with associated economic reforms signal a return to a more stable market, according to JLL's Q3 Cairo Real Estate Market Overview. 

JLL's report outlines how the residential and other sectors are showing signs of improvement in 2017 following a period of instability owed to devaluation of the Egyptian currency and new reforms introduced by the government.  

"The real estate market overall is starting to stabilise with developers continuing to invest in existing and new projects. Flexibility is key as developers have had to adjust their products in response to reduced consumer purchasing power. Increased investor confidence suggests the residential market is approaching the bottom of its current cycle, paving the way for overall improved market conditions in 2018,'' says Ayman Sami, Country Head of Egypt, JLL.  

The residential market is supported by further expansion plans of the satellite cities as they continue to absorb population growth and reduce densities in Central Cairo. The strength of underlying demand protects the residential sector from the full force of economic pressures impacting the commercial markets.

Although there were no additions to residential supply in Q3, construction continues on previously announced projects and an increased number of projects are expected to be launched within the New Capital City.  

The hotel and tourism sector has witnessed improved occupancy rates on the back of the government's campaign efforts to boost domestic and international tourism and more competitive room rates. Further projects have been announced in Cairo and across Egypt demonstrating restored investor confidence.  

Despite developers continuing to invest in extending current and new projects, the retail market continues to face challenges as retailers remain squeezed by increased prices and falling consumer power. 

The office market has seen little further decline in face rentals in Q3 and rents are expected to soften over the next 12 months.


Sector summary highlights – Cairo


Hot Topic    

The announcement of new projects such as Heliopolis Development Group's 'Cairo Capital Center' reflects improved confidence in the office sector. Located in sector 1 of New Cairo, the six story development will add around 7,750 sq m of prime office spaces by the end of 2018.  


Cairo's Grade A office supply remained stable at 958,000 sq m, with no new space completed in Q3. Future supply levels remain modest, with most of the new space currently underway located in East Cairo with around 60,000 sq m of space expected to be delivered in Cairo Festival City during Q4 2017. 


While vacancy levels have remained stable during Q3 they are expected to increase with additional stock being added to the market later in the year. Developers have responded to the soft market conditions and the pressures faced by tenants by reducing rents in the first half of the year. 

The banking sector remains the most active, with a number of banks expanding their administrative offices as well as seeking additional branches.  This demand is partially due to government policies to promote financial inclusion. 

Oil & Gas occupiers continue to expand, given increased local exploration activity. Further exploration agreements between foreign and local entities are expected to generate additional demand into 2018. 


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Flexibility is the new competitive edge with developers now adjusting their product base and operation plans.  Among the strategies being used to attract sales in an increasingly competitive market are extended payment plans and improved community facilities as developers seek to offer more value for money.  Community creation has become a key means of creating competitive edge to target those consumers seeking to maintain a dynamic lifestyle. 


There were no new additions to the gated community residential supply in Q3 2017, but construction continues on previously announced projects. The majority of the 33,000 units scheduled for delivery over the next 3 years are located in New Cairo.  An increased number of projects are expected to be launched within the New Capital City, further enhancing the easterly shift in the growth of Cairo.   


Sales prices have generally increased over Q3 in USD terms, as the market has stabilised following the sharp decline on the back of the EGP devaluation. In EGP terms, sale prices have increased dramatically since the devaluation, with this being further fuelled by increased construction costs and the upsurge in residential demand as a safe haven investment during times of economic turbulence. 

The rental market has stabilized in Q3, following its noticeable decline in rents earlier in the year in both New Cairo & 6th of October. 


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While most of the recent additions to supply have resulted from new developments, the expansion of existing malls also continues.   The Mall of Arabia is adding a further 40,000 sq m of GLA (along with a 34,000 sq m park expansion) due to complete in 2018. 


No additional retail projects were completed during Q3 with the total stock of mall based retail remaining at around 1.46 million sq m of GLA.  Construction work continues on a number of major projects including Majid Al Futtaim's Almaza City Center (103, 000 sq m) which is due to complete by Q1 2018. 


The retail sector has been negatively impacted by the recent economic turmoil, causing the majority of products to increase in price.  Retailers are also facing the additional burden of debating having to pay VAT on top of their rental payments within some developments. Developers have reacted to these difficult market circumstances facing their tenants. Most owners have sought to maintain average asking prices, while offering more flexible payment terms and fixed exchange rate caps.

Vacancy levels in the retail sector have increased over the past year (from 15% to 18%) due to soft demand and the completion of addition retail supply in Q1 2017.


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Investment opportunities continue to surface on the back of the EGP devaluation. The government recognises the importance of the tourism sector and has launched a number of initiatives to improve security and increase investment (with a new investment law to ease of cost of doing business in Egypt and restore investor confidence). 

The Ministry of Tourism continues to promote domestic travel, by supporting local investment in the hospitality and leisure developments through advertising campaigns.  Investors and operators have responded with increased announcements of plans to both refurbish existing properties and develop new ones.


No completions took place during the third quarter, with the total hotel rooms stock remaining at approximately 22,500 rooms. The Cairo Pyramids Hotel (formerly Movenpick) has been renovated and rebranded as a Steinberger property, increasing the presence of the group in the country. 

The next major completion will be the Sheraton Giza, which is planning its grand opening in October 2017. A total of 2,700 additional hotel rooms expected to complete within Cairo over the next three years.


Demand continued to rise throughout Q3, resulted in occupancy rates growing from 59% last year to 71% YT August, as Egypt has become a more competitive destination. The downside of the devaluation of the EGP devaluation is that ADR levels have decreased by 11% from USD 106 in YT August 2016 to USD 95 in the same period of 2017.

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