10% in­crease in re­tail rents in Q1 2018: JLL

RES­I­DEN­TIAL PRICES CON­TIN­UED TO RISE IN Q1 BUT AT LOWER LEV­ELS TO REACH 2-7%, SAYS JLL

The Daily News Egypt - - Front Page - By Shaimaa Al-Aees

The res­i­den­tial mar­ket has ex­pe­ri­enced strong price in­creases over the past year, which re­sulted in a num­ber of new projects be­ing launched dur­ing the first quar­ter (Q1) of 2018, ac­cord­ing to Jones Lang LaSalle’s re­port Cairo Real Es­tate Mar­ket Q1 2018.

The re­port said that these new projects in­clude City Edge De­vel­op­ments’ Etapa and most of the new launches have been to the east of Cairo be­tween New Cairo and the New Ad­min­is­tra­tive Cap­i­tal. Fur­ther, Al Marasem De­vel­op­ment re­cently an­nounced its sec­ond res­i­den­tial project, Cap­i­tal Gate, over 407,000 sqm in New Cairo.

Re­gard­ing sup­ply, the re­port noted that around 2,000 units were com­pleted dur­ing, Q1 bring­ing the com­mu­nity sup­ply to around 138,000.

A fur­ther 13,000 units are ex­pected to en­ter the mar­ket over the re­main­der of the year, ac­cord­ing to the re­port.

The re­port pointed out that Q1 2018 wit­nessed a sig­nif­i­cant num­ber of project an­nounce­ments, mainly lo­cated in east Cairo, with these projects ex­pected to con­trib­ute to new sup­ply over the next three to four years.

It also ex­plained that there was less ac­tiv­ity in the city of Sixth of Oc­to­ber with just mi­nor de­liv­er­ies recorded across pre­vi­ously an­nounced projects.

“Prices con­tin­ued to in­crease across all sec­tors of the res­i­den­tial mar­ket in Q1 but at lower lev­els to reach 2-7%, com­pared to the hikes recorded in the sec­ond half of 2017. The in­crease in com­pe­ti­tion and the suc­cess of new mar­ket en­tries priced at com­pet­i­tive lev­els has con­trib­uted to the slow­ing in price growth com­pared to pre­vi­ous lev­els,” the re­port elab­o­rated. “De­vel­op­ers are re­spond­ing to the in­creased com­pe­ti­tion by re­duc­ing the unit siz­ing and of­fer­ing more flex­i­ble pay­ment terms to at­tract buy­ers.”

The re­port added that the rental mar­ket has con­tin­ued to de­cline, with fur­ther falls in rental lev­els be­tween 1% and 7% in Q1. There re­mains some tem­po­rary de­mand from pur­chasers await­ing the de­liv­ery of off-plan units.

JLL said that the re­tail sec­tor was the most neg­a­tively im­pacted by the cur­rency de­val­u­a­tion and other eco­nomic re­forms over the past two years, with an av­er­age de­cline of 45% in rents in US dol­lar terms be­ing recorded dur­ing 2017. This sit­u­a­tion has now sta­bilised and some of these de­clines are be­ing re­couped, with rentals in­creas­ing by 10% in US dol­lar terms in Q1 2018. There re­main op­por­tu­ni­ties for re­tail­ers to ex­pand their foot­print and for de­vel­op­ers to phys­i­cally re­shape their malls in line with emerg­ing con­sumer trends.

The re­port added that re­tail sup­ply re­mained at around 1.5m of gross leas­ing area (GLA) with no sig­nif­i­cant ad­di­tions en­ter­ing the mar­ket dur­ing Q1. There re­mains one project ex­pected to en­ter the mar­ket be­fore the end of 2018.

“Re­tail sales across Egypt con­tinue to in­crease and the to­tal re­tail sales reached $79.5bn in 2017, with the fig­ure fore­cast to in­crease by around 17% to reach $95.3bn dur­ing 2018. Re­tail rents ex­pe­ri­enced a sharp drop in 2017 due to the EGP de­val­u­a­tion. How­ever, rents are now sta­bil­is­ing as de­vel­op­ers have adapted the new mar­ket con­di­tions, which con­trib­uted to an in­crease of 10% in av­er­age rent for shops within su­per re­gional malls in Q1 2018,” the re­port elab­o­rated. “Sec­tor va­cancy in­creased by ap­prox­i­mately 2% yo-y, reach­ing 12% in Q1 com­pared to 10% in Q1 2017, and is ex­pected to in­crease with new mar­ket ad­di­tions.”

The of­fice sec­tor has ex­pe­ri­enced rel­a­tively sta­ble per­for­mance over Q1, with de­mand mainly geared to­wards con­sol­i­da­tion within fully in­te­grated of­fice parks, which has re­sulted in the an­nounce­ment of a num­ber of new busi­ness dis­tricts across the coun­try. While rents have in­creased in New Cairo in Q1, rents in the Cen­tral Busi­ness District and west Cairo have re­mained un­changed. Of­fice rentals are ex­pected to pick up fur­ther in the medium term due to the con­tin­ued im­prove­ment in busi­ness sen­ti­ment.

Re­gard­ing of­fice sup­ply, the re­port noted that there were no com­ple­tions recorded dur­ing Q1 with the to­tal of­fice stock re­main­ing at 986,00 sqm of GLA. There is an ad­di­tional 68,000 sqm ex­pected to be added by the end of 2018,with most of this space within Cairo Fes­ti­val City. New Cairo re­mains the pre­ferred lo­ca­tion for ad­di­tional of­fice sup­ply, with a num­ber of new projects be­ing launched re­cently in re­sponse to strong de­mand. Sup­ply in west Cairo re­mains sta­ble with no new project an­nounce­ments and no com­ple­tions sched­uled for 2018.

The re­port pointed out that New Cairo con­tin­ues to ex­pe­ri­ence rental growth be­tween 11% and 16% over Q1 due to strong de­mand for spa­ces in that area due to its prox­im­ity to Cairo In­ter­na­tional Air­port and the New Ad­min­is­tra­tive Cap­i­tal.

“Va­can­cies in the of­fice sec­tor re­mained sta­ble at 18% over Q1 but are ex­pected to in­crease over the course of the year due to the new mar­ket ad­di­tions,” the re­port pointed out.

THE OF­FICE SEC­TOR HAS EX­PE­RI­ENCED REL­A­TIVELY STA­BLE PER­FOR­MANCE OVER Q1

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