Amidst current economic conditions and rising interest rates, many investors are turning to commercial and administrative real estate as a profitable and secure investment. These properties provide a reliable source of income that can cover daily expenses and loan installments, making them a preferred choice during times of financial instability.
The demand for these types of properties is significantly increasing, leading to substantial price jumps that reflect their attractiveness and high value. Investing in commercial and administrative real estate proves to be not only a safe investment but also a growing opportunity that meets the needs of investors seeking long-term financial stability.
According to data reviewed on the Aqarmap platform, during the first half of 2024, the prices per square metre for commercial properties in Egypt have noticeably increased compared to the previous year. In New Cairo and the Fifth Settlement, prices currently range between EGP 200,000 and EGP 500,000 per square metre in some projects, particularly in the Golden Gate project by Redcon Properties in the Fifth Settlement, New Cairo. Meanwhile, prices in some projects in the New Administrative Capital have reached EGP 350,000 per square metre, although the average is between EGP 150,000 and EGP 200,000 per square metre.
In 2023, prices were much lower, indicating an increase ranging from 20% to 40%. This rise is attributed to higher construction costs, the liberalization of the exchange rate, increased bank interest rates, and growing demand for commercial properties that provide recurring monthly returns for investors.
Meanwhile, administrative metre prices in New Cairo saw a notable increase. In the Fifth Settlement, for example, the price per administrative metre reached between EGP 200,000 and EGP 300,000. These prices represent a significant increase compared to the previous year, where administrative metre prices in 2023 ranged from EGP 150,000 to EGP 200,000. Additionally, New Sheikh Zayed surpassed Sheikh Zayed in administrative metre prices, recording over EGP 200,000 per administrative metre. In the New Administrative Capital, the price for an administrative metre does not exceed EGP 200,000, especially in the Iconic Tower and the other adjacent towers, where prices ranged from EGP 175,000 to EGP 205,000 per metre, according to Ahmed Abdel Fattah, Business Development Manager at the Aqarmap platform.
According to Mordor Intelligence, the size of the commercial real estate market in Egypt is estimated to be around $9.41bn in 2024 and is expected to reach $15.29bn by 2029, with a compound annual growth rate of 10.19% during the forecast period (2024-2029). Demand for office spaces is primarily concentrated in east and west Cairo.
Abdel Fattah explained that commercial real estate prices in some governorates outside Greater Cairo have seen a notable increase, surpassing administrative property prices. At the forefront is Alexandria, where the price per commercial metre reached EGP 576,923 on one of the main streets for a space of 65 square metres, totaling EGP 37.5m. Meanwhile, the price per commercial metre in a mall within a residential project in Alexandria is approximately EGP 473,684. In contrast, administrative property prices in Alexandria do not exceed EGP 150,000 per metre. Following Alexandria is Asyut, where the price per commercial metre has surpassed EGP 300,000 in some areas, particularly in the city centre. In Mansoura, the price per commercial metre has exceeded EGP 200,000.
Abdel Fattah pointed out that the rise in commercial property prices is due to limited supply compared to demand, noting that the available high-quality properties are very limited because they require facilities with very high quality standards, which increases their implementation costs. Additionally, commercial and administrative property prices within malls and shopping centres tend to be higher than those found within gated communities or compounds or outside of them.
He added that the prices of commercial and administrative units are higher than residential units because these properties are located in business centres and vital commercial areas, which increases their value. They also require additional facilities and services such as security, maintenance, parking, and technical amenities that are not necessarily available in residential units.
For his part, Ayman Sami, Director of the JLL office in Egypt, stated that the prices of administrative properties have risen due to increased demand for offices in the second quarter of this year compared to last year, especially for larger spaces ranging from 2,000 to 5,000 square metres.
Sami noted that the demand for high-quality Class A administrative properties has increased significantly, leading to a rise in their prices compared to last year due to the limited supply. He explained that the Fifth Settlement area is characterized by the highest prices due to the increased demand from companies looking to expand or relocate their operations to East Cairo.
Sami pointed out that despite the rising demand for administrative properties, rental prices have decreased by 6% year-on-year. He mentioned that the vacancy rate for available administrative properties for rent or sale stands at 10%.
Ahmed Abdallah, Vice Chairperson of Redcon Properties, believes that investing in commercial and administrative properties is an attractive option for many real estate investors for several reasons. The most important of these is that the return on investment for commercial and administrative properties is higher than that of other types of properties, as well as the greater appreciation in asset value over time compared to residential properties, for example. Additionally, prices for administrative and commercial properties have increased significantly, reaching 200% compared to prices in the first quarter of 2022.
Abdallah added that one of the main reasons for the recent rise in prices of commercial and administrative properties in East Cairo is the economic factors that began to take effect in the second half of 2022 and continued throughout 2023. These factors included changes in the exchange rate and the severe decline in the value of the Egyptian pound, as well as a significant shortage of foreign currencies during that period, which led to a halt in the import of construction materials. Consequently, this resulted in a substantial increase in the cost of construction materials, along with a shortage of imported building materials.
He concluded that the headline inflation rate in Egypt, which peaked at over 40% by the end of 2023, pushed investors and capital owners to expand their purchases of properties as a hedge against inflation. These factors, including the rising cost of construction and the high demand for commercial and administrative properties, have led to an unprecedented increase in prices for these types of properties.
