A “roller coaster ride” for Egypt

RetailME Bureau

The Egyptian market experienced a “roller coaster ride” in 2019 that saw a wide range of “booms and busts,” which are being addressed by the government in line with Egypt Vision 2030, indicated JLL’s 2019 Year End Real Estate Market report.

Following a positive start to 2019, most sectors of Cairo’s real estate market remained soft by the end of Q4, with the government currently undertaking extensive strategic plans to stimulate growth and drive investment opportunities.

“The year 2019 was intriguing on so many levels for Egypt. It will be remembered as a year which saw our country addressing a wide range of changes and challenges right across the real estate sector,” said Ayman Sami, JLL’s country head for Egypt office. “The good news is that after the shock of fuel subsidy reforms wore off, and with price pressures alleviated in recent months, we are expecting domestic demand to strengthen in the forthcoming period.”

The retail sector was slightly challenged in Q4, with retailers either consolidating or limiting their expansion plans. Vacancies decreased to 12% but are expected to shoot up in the medium term as rents hike and demand on retail space drops. However, according to Sami, “The real estate sector is a main driver of Egyptian economic growth…and will see a boost in demand in the medium and long-term.”

Look ahead

Around 88,265 sqft of retail GLA were added to Cairo’s retail supply in Q4 2019, following the delivery of a couple of mixed-use developments in New Cairo, namely White by The Waterway. This brought the total GLA to 24.1 million sqft. A further 994,585 sqft of retail space will probably be supplemented after several other projects open in the near term, including Madinaty Open Air Mall in East Cairo.

While e-commerce gains ground worldwide, local consumers are becoming more cautious with their spending, hence minimising their retail consumption and interacting with retailers through new technologies. Accordingly, retailers were compelled to revamp their stock inventories, while also further expanding to cater to changing consumer trends.

Ahmed Ragab, Group CEO, Baraka Retail Group

In this context, Ahmed Ragab, group CEO of Baraka Retail Group observed, “Digital transformation is a relevant agenda for business. In our part of the world, however, the major chunk of business happens in the brick-and-mortar environment. Of course, we have to leverage the right pieces of technology to enhance the shopping environment and meet the evolving, omnichannel, consumer demands. For example, consumer shop online mainly driven by the need for convenience. So, we will have to give them that option.”

Ragab also added that the goal is to meet customer expectations and requirements, irrespective of the channel or format. “We have to create the right environment for the brand to operate optimally. For our New Balance business, we have stores of varying sizes, ranging from 1,290-3,230 sqft. Factors like the brand, concept, location, catchment determine the size of the store. In terms of online, there are several other factors to evaluate. There are far too many variables; it’s wrong to base the decision on a single factor.”

Despite limited supply, Cairo’s retail market is predicted to maintain a robust foothold in the market, exhibiting a strong potential demand over the coming year. East Cairo will remain the most preferred area for retail development in 2020. For the forthcoming year, Cairo’s retail market is seen to enjoy additional footfall on the back of the recent inauguration of City Centre Almaza in Q3 2019. Besides, an insatiable demand for F&B outlets was manifested over the final quarter and is anticipated to continue next year. Yet, developers need to be able to retain the strong demand for Cairo retail, and thus create a more appealing industry and maintain healthy growth.