John Davis: Egypt needs more healthcare and educational facilities

29 October 2017: Leading global real estate consultancy corporation Colliers International has over 554 offices worldwide, including Cairo’s office that has been operating over the past years, providing customized services in the real estate market. Business Today spoke with Colliers International CEO John Davis about the Egyptian real estate market. Davis emphasized that purchase power is higher among Egyptian expats than locals; however, he confirmed that the market lacks development in the health and education sectors.

It has been almost a year since the Central Bank of Egypt’s decision to devaluate the Egyptian pound. How do you think performance of real estate has improved over the last period in Egypt?
I think the market is operating very well, the purchasing power comes now from buyers outside of the country, and the availability of stock properties in the country is still present. There is a lot of room for opportunities in the real estate sector.
I don’t think there are any risks, because if you have a look at all the sectors, you’ll find that the residential market will continue to do well, because there is a high demand in this sector. As long developers continue to construct the right product, there will be a turn out. There is also demand for international quality in the commercial sector in office spaces.

Have there been any improvements in MENA’s real estate market, especially after most of the GCC countries are trying to diversify their economies and depend less on non-oil revenues?
I think the MENA real estate market has improved, but it still has few challenges that developed over the past few years. Overall, it has suffered in certain markets due to geopolitical consequences.
There is room for growth in the MENA region real estate market in the healthcare and education sectors more than other sectors, and even in Egypt. You’ll find vast potential for the healthcare market in the region, because the population is growing, and new areas, such as east Cairo for example, have a chance of accommodating large communities when developing day care clinics, hospitals and medical facilities. When these outlets are built in these new areas, you will then see a new investment class coming through and will fill the undersupply in these sectors.
Approximately 2.7 million square meters in Egypt need to be developed into healthcare and education facilities, and half a million square meters in Cairo alone. The current usage of actual residential properties in Egypt that are turned into medical clinics needs to be changed.

How would you rate the current demand in the Egyptian real estate market? What sector is receiving more demand than others in your opinion?
In regards to the office sector, there is a demand for good quality office space and the available office spaces currently. Investors demand for spacious offices, F&B facilities and retail facilities, which can be developed late into a lifestyle community featuring the concept of “Eat, work and play”. Clients who come to Colliers International tend to look for spaces ranging between 10,000 square meters to 12,000 square meters, which is limited.
The retail sector is one of the sectors that are suffering the most with the devaluation of currency, where retailers are challenged by bringing in imported goods; however, the hospitality sector features good growth.

What types of investors are currently showing interest in the Egyptian market?
There are regional investors who are interested to enter the market, including GCC countries and Egyptian expats who have a higher income since the devaluation and would consider buying second homes.
International investors don’t show interest at the moment, because there isn’t any international quality of product. If an international investor wants to come into a market, they will predominately go into an asset, but will question the exit strategy, which Egypt lacks with the existence of inflation.
Any investor needs to study the exit strategy, and if the exit strategy is risky, then other markets would be better to invest in.

What do you think of the current real estate & urban development projects that the Egyptian government is implementing?
I think the expansion plans should consider studying the requirements of communities – if they have the ability to look at master plans and get to benefit those communities, then they will add value.

What do you think of the current Egyptian investment law? Do you think it’s attracting more investments and foreign currency into the country?
I think the government is doing the right thing, but we’ll have to see as it unfolds and try to lower the risks for international investors to come into the market.

What sectors in Egypt lack development the most in your opinion?
The healthcare and education sectors, the hospitality sector across Egypt, and anything in the coastal areas. We have seen an improvement in the hospitality sector and are optimistic for more growth.

Do you think we are approaching a bubble burst?
I don’t think there is a bubble forming at all. There are good fundamentals present in the market at the moment.

In your opinion, generally, what do you see in store for the real estate market in 2018?
I think the market is stable and the future is bright. This stability is good and is needed, and if inflation decreases, that will help the market to grow.

An expert in real estate for over 27 years, Davis joined Colliers International in South Africa in 1994, where he later entered into the facilities management sector across Southern Africa, and later was declared as property and facilities management director in 1998. Davis has operated the UAE office to boost business growth across the MENA region and currently manages regional offices that have expanded to 15 countries since he became regional CEO.