Boston, MA -- (SBWIRE) -- 02/20/2014 -- We believe that the real estate sector in Egypt will continue to stagnate in the face of a depressed economy and continuing political unrest. However, we have predicted a rise in rental rates in Cairo, New Cairo, and 6th of October City due to a stagnation of new supply to cover slightly increasing demand, especially for space in safer suburbs such as New Cairo and 6th of October City. Future political upheaval may continue to negatively affect all sectors, but specifically Cairo and Giza as businesses flee to the safety of the outskirts.
In spite of Egypt's long-term potential, the country continues to be susceptible to instability and will be characterised by the aftershocks of the Arab Spring in the short-to-medium term. We see little prospect for a swift economic recovery in Egypt. Although we remain bullish in the long term, our most recent data continue to reveal the tangible effects of Egypt's uneasy political transition on the commercial real estate market, with retail space suffering particularly from the country's volatility due to its dependence on tourism.
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The Egyptian economy is stuck in a rut from which it does not appear likely to escape anytime soon. What it needs most to recover - namely an end to frequent outbursts in violent unrest, and greater clarity on the medium-term policy trajectory - are the things for which we are the least optimistic on in the near term. Much is often said about the need to sign a long-awaited IMF Stand-By Arrangement, which would certainly aide the country by providing a key source of external financial assistance and forcing necessary structural economic reforms. The more volatile Egypt becomes, the slower its economy will recover from both the economic crisis as well as its multiple coups, and the less FDI will come in as investors move on to more stable nations.
Egypt currently has a decent supply of office stock, mainly utilized by the energy and banking sectors. While supply is slowly increasing, the political events within Egypt are complicating things by increasing the demand for more secure spaces, often on the outskirts of Greater Cairo (such as in New Cairo or 6th of October City). Congestion and a lack of parking is also pushing large multi-national corporations out of urban Cairo and towards the suburbs. The situation is the same in Giza, which is seen more and more as an unstable and unsafe location prone to overcrowding.
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