In light of Egypt’s changing macroeconomic conditions, JLL, the world’s leading professional services firm specialising in real estate, investment management, and development consulting, today explored newer avenues and mitigation strategies to achieve real estate success in an insightful dialogue with industry experts and thought leaders at their ‘Thriving in Turbulent Times: Effective Mitigation Strategies for Real Estate Success’ event.
Egypt has been undergoing multiple economic turbulences over the past couple of years and while global economic shocks have significantly impacted the fiscal stability of the country, the real estate sector is observing a shift in mindset, leading to the emergence of new trends. Rents in Cairo’s residential sector are expected to rise in the short term as demand continues to build momentum. Moreover, the city continued to see a higher preference for Grade A office spaces, primarily from tenants relocating from older buildings to newer ones. Furthermore, the hotel industry appears to have turned a new leaf. As a result of the Government’s focused investment efforts in the tourism industry, hotels in the capital saw a rebound as revenue per available room (RevPar) increased by nearly 122% between January and December 2022.
Following the two devaluations of the Egyptian pound last year coupled with the additional depreciation of the local currency in January this year, the built environment continues to feel the tremors of the country’s precarious economic situation. Consequently, there is an urgent need for the adoption of mitigation strategies in real estate that will help organisations shield themselves from the current scenario.
Emphasising the aforementioned, industry stalwarts at the event highlighted the need to recover with productive outcomes and the play of mitigation strategies in it. They underlined that fundamental measures such as cost optimisation through outsourcing services should become a priority, as is the need to take a back step and reassess one’s company balance sheets, financial status, and reshuffling cashflow, all of which can lead to a greater possibility of attracting foreign direct investment.
Besides diversification of portfolio and partaking in mergers and acquisitions, they also underscored that sustainable developments should be a key part of a company’s strategy playbook, not only because it is cost-effective in the long run, but it also helps one gain access to the growing pool of conscious international investors and tenants.
Ayman Sami, Country Head, Egypt at JLL, said: “Despite the challenging times we are in, some people continue to seek refuge in real estate, trusting it to be a hedge against the inflationary environment. That said, the industry is not immune to the impact of the current economic challenges, reinforcing the need for industry players to embrace robust mitigation strategies, such as a careful approach to cost and portfolio management, as well as risk allocation, which will enable them to not only better respond to changing market dynamics but also attract the attention of international investors.”
At a time when cost management has become a critical tenet determining business success, the importance of program management cannot be overstated. Companies must involve Project Management Consultancy (PMC) firms with proven experience in project and cost management, as well as adopt maximum flexibility to present innovative proposals while applying project management tools and methodologies in a highly effective manner.
Further elaborating on this, Mohammed Nabil Head of Projects and Development Services Egypt at JLL, said: “At a time of economic uncertainty, mapping risk contingencies become extremely critical, and this is where project management consultancies play a paramount role. Setting appropriate project budgets, development phasing, controlling costs throughout all project phases, applying suitable and reasonable payment mechanisms and conditions, determining the most suitable procurement routes, and implementation of BIM during design and construction are the key factors to overcome the current and anticipated economy challenges and efficiently control the construction costs.”
Other speakers at the event included Ayah Ghanem, Director, Consulting at JLL who yet again stressed on the significance of mitigation strategies for developers to overcome this phase of economic uncertainty with minimal losses and build a robust growth trajectory.