According to London-based research company Fitch Solution’s Q2 2023 report on the global real estate industry, office rents in Egypt are expected to drop significantly in US dollar terms in 2023 as the government struggles with high inflation, a strict monetary policy, and decreasing economic growth.
According to the report, “In the longer term, a stabilisation in GDP growth as well as in the growth of tertiary services output should provide some support for office space demand.”
The highest-renting city, Cairo, is expected to see a decline in average rent of over 30% annually to USD 17.4 per square metre per month. The monthly reductions in Giza and Alexandria will be more significant, at 31.6% to USD 9.3 and 35.7% to USD 8.2, respectively.
According to the research, the outlook is better for the remainder of the medium-term forecast period, which runs through 2027, with real GDP growth rising to 5.1% in 2024, the inflation rate moving lower, and the loosening of the monetary policy.
Cairo and Giza will continue to have the most excellent net yields (8–10%), which is constant from previous years, followed by Alexandria (6-7%).
In the long run, according to Fitch, when the economy rebounds from the shocks of the COVID-19 outbreak and the Russian invasion of Ukraine, there will be a tremendous opportunity for development in the office real estate market.
In the short term, a hawkish monetary policy will hinder Egypt’s growth in private investment and residential and non-residential development.
Government reforms, divestment plans, and an anticipated IMF programme will probably support investor confidence and investment in the building sector over the medium to long term.
Sustainable Housing Demand
Due to the consequences of the COVID-19 pandemic, residential housing remained restrained in 2020, although the long-term fundamentals of Egypt’s residential construction sector remain favourable.
The main underlying reasons are strong population fundamentals, an economic diversification strategy, and an annual urbanisation rate of 2%.
“Egypt is the most populous market in the Middle East and North Africa region and offers a level of sustainable housing demand over the medium-to-long term,” the report continued, “With a young and growing population of around 91 million, Egypt is the most populous market in the region.”