By Andy Sambidge
Jones Lang Lasalle says aftermath of revolution will hit residential, retail, hotels in short-term
Egypt's real estate market may be facing a "lost year" in 2011 as a result of the recent revolution, Jones Lang Lasalle said on Tuesday.
The real estate investment and advisory firm, predicted a positive medium to long term outlook for the Cairo real estate market.
But JLL said in the short term, real estate activity in Cairo would remain depressed due to the on-going uncertainties dominating the post-revolution period.
"2011 could therefore represent something of a 'lost year' with decisions to lease or purchase real estate delayed until the 'dust settles' and greater certainty returns to the market after the elections later in the year," it said in a statement.
"Irrespective of the recent developments, the basic fundamentals of the Cairo real estate market have not changed and looks positive for the medium to long term," said Ayman Sami, head of Egypt Office, Jones Lang LaSalle MENA.
"Egypt could emerge stronger eventually through greater transparency and business friendly policies. Such a scenario could make the country more attractive for business in the long term in comparison to the pre-revolution period," Sami added.
Although H1 2011 is expected to remain subdued, some sectors are expected to experience positive moment towards the end of the year, with the tourism industry - a key to Egypt's GDP - expected to lead the rebound.
In the office sector, leasing activity is expected to regain momentum later in 2011 on the back of increasing availability of higher quality new supply and lower rents, JLL said.
"Egypt was and will remain as one of the most attractive real estate markets in the MENA region in terms of its potential long term opportunities, growth and diversity.
"In the present climate, there remains (albeit reduced) liquidity in the system and those opportunistic investors currently active in the market could be rewarded by an ability to negotiate more attractive deals than those available at the end of 2010 before the recent unrest", said Sami.
Egypt needs to focus on low margin affordable properties and social housing to satisfy the new voice of its people. Luxury gated communities on the Mediterranean and Red Sea symbolise the previous regime.
A newly elected government will have to be extremely careful about what projects they allow to continue or go ahead, if a project is not to the benefit of the Egyptian people then it will be shelved. There are a number of cases in the Egyptian courts concerning the illegal and underpriced sale of land by the previous government which bypassed the normal public auction system, it is likely that all luxury developments on those plots could be cancelled.
Gulf developers who have interests in the Egyptian market will no doubt suffer as the vast majority of their projects would be at the high-end. Looks like North Africa part of the MENA region in general will bias toward social and affordable housing. Imagine that most wealthy developers in Egypt will be under the legal microscope.