The country is a tale of dynamism in the face of adversity, says Muriel Muirden.
After two years of stagnancy, we all need a feel-good story, and Egypt provides the backdrop. A diverse economic base, an inward investment-friendly government and a rapidly expanding population mesh together to create one of the most dynamic construction sectors in the EMEA (Europe, Middle East and Africa) region.
Large-scale infrastructure development, ambitious new-build communities, dynamic regeneration schemes and resorts contributed to a 13% growth in the construction sector in 2009 and ongoing positive growth throughout 2010. The outlook remains upbeat and the scale of projects in the pipeline is impressive.
Historically, development flourished under the control of indigenous and often highly diversified companies such as Orascom, but this has been changing over time, with the big Gulf players quick to identify potential and eager to invest. Qatari Diar, Emaar, Damac, Al Futtaim Group and The Kharafi Group, to name a few, all have projects under way often teaming with a local partner to facilitate the bureaucratic process.
Cairo in particular is benefiting from a plethora of mixed-use projects, such as Zaha Hadid’s Cairo Expo City and Stone Towers, as well as the Mall of Africa, Cairo Festival City and Qatari Diar’s Nile Corniche Project.
Out of the city, new centres are reaching out to the growing middle and professional classes – schemes like New Giza, which aims to offer Cairo residents a new type of suburban lifestyle with green spaces and recreational facilities, alongside hospitals, education amenities and hotels.
The fly-flop-and-fry market
Despite the threat of more terrorist attacks, Egypt’s Red Sea coastline has been the focus of intense development for more than a decade and developer interest shows no sign of slowing down. In a new world where resort development is largely viewed as too exotic for many equity investors and sovereign wealth funds, Egypt’s Red Sea Riviera reverses the trend. Its long stretch of undeveloped coastline and land deals incentivised by the government offer significant opportunities.
Confidence is largely driven by the ongoing growth in demand for inexpensive “fly, flop and fry” beach holidays from Northern Europeans and increasingly Russians, Ukrainians and other Commonwealth of Independent States (CIS) visitors seeking respite from long, cold winters. Masterplans for these projects abound, with large resort hotels and significant numbers of holiday homes, anchored with amenities ranging from golf courses to themed water parks.
The scale of the projects is also unique. Damac’s Gamsha Bay complex in Hurghada will cover some 29.7 million sq m. Sahl Hasheesh Bay, being developed by the Egyptian Resorts Company, will cover some 30 million sq m and the popular resort of Sharm el Sheikh continues to draw interest from both indigenous and Gulf-based developers. Even Egypt’s “chillier” Mediterranean coast is still attracting investment.
Egypt’s population stands at around 86 million and is growing rapidly. Around a third of the population is under 14 years of age, indicating a crucial short-term need to create employment on a grand scale and to provide homes, education, healthcare and infrastructure to growing communities throughout the country but focused particularly in the major cities, notably Cairo.
The 2006 census identified an estimated national housing shortfall of some 6 million homes. The government estimates that a staggering 820,000 units have to be added to the national housing stock each year for the coming two decades if demand is to be met.
International investor interest in the luxury- and mid-market sectors has been evident, but predictably it is the lower income community housing at the bottom of the food chain that is of growing concern to the government.
Muriel Muirden is managing director of economics at Aecom.