Egypt's industrial zones to build manufacturing capacity

Industrial real estate has been a mainstay of economic development for decades. Over time, industrial developments have shifted from areas like 6th of October City to large-scale zones that host one manufacturing segment – for example, the $2.2bn textile complex in Al Sadat City. In 2014-21, 17 such complexes in 15 governorates were established, with LE10bn ($835.4m) worth of investment. These included the 200-ha leather zone in Al Rubiki and a 125-ha furniture zone in Damietta, while a 3m-sq-metre textile zone was under construction as of mid-2021. As of February 2022 there were 127 economic zones across Egypt, according to the General Authority for Investment and Free Zones.

Driver of Development

These facilities have had an outsized economic impact, bolstering both manufacturing and real estate. The two are large contributors to GDP, with manufacturing – excluding petroleum refining – accounting for 12.2% of the total in FY 2020/21, or LE732.1bn ($46.5bn) in current prices. Real estate, meanwhile, contributed 11.4%, or LE687.3bn ($43.7bn).

“Non-residential projects are now a significant part of developers’ operations given the government’s objective to upgrade infrastructure to meet the aims of Egypt Vision 2030,” Mohamed Mahlab, president and CEO of Rowad Modern Engineers, told OBG. “There is strong growth potential for engineering firms and general contractors based on the domestic project pipeline, as well as opportunities to export services.”

Technology and innovation are also playing a more prominent role in developments. “Technology will likely be key to establishing the link between industry and real estate developers,” Adel Lofty, head of the Egyptian Real Estate Developers Council, told industry media in October 2021. “A published digital map of all this information, coupled with favourable investment laws specific to industrial city investments, will be the building blocks leading to the success of industrial cities.”

While Cairo and Alexandria host much of the country’s economic activity, Upper Egypt was home to nearly 40% of industrial complexes in 2018, accounting for 50 of the 114 in operation at that time. The number has expanded in the years since, with 20 nearing completion as of December 2021. These zones are part of a wider effort by the government to develop industrial capacity in the region through the construction of new industrial complexes, the rehabilitation of existing zones and the identification of opportunities for investment.

Expansion

Real estate and industry have been key pillars of the government’s post-pandemic recovery strategy. Central to this has been the development of industrial real estate for manufacturers, fitted with features to address the challenges facing the sector – especially those related to power supply – encourage investment and boost local industrial capacity.

In 2021, 1500 new factories came on-line across the country, with 14m sq metres of industrial land offered to investors. These developments added 1657 units of industrial space at a cost of LE4.7bn ($298.6m) in complexes in the governorates of Beni Suef, Minya, Sohag, Luxor, the Red Sea, Alexandria and Gharbiya. Moreover, in December 2021 six complexes were launched aimed at encouraging small investors to obtain units, with incentives such as waiving application costs; granting 10-year leases, subject to renewal; and offering a six-month grace period on rents. The authorities are targeting smaller firms in particular, working with eight banks and the Micro-, Small and Medium Enterprise Development Agency to offer up to 100% financing.

The government has indicated plans to expand further. In June 2021 it announced plans to establish three industrial cities and 17 complexes for small industries. The LE10bn ($635.4m) programme will cover 15 governorates, with the facilities set to come on-line by 2028. The new cities will house 5046 industrial units, creating 48,000 direct jobs. These new industrial cities are expected to support economic expansion, generate jobs in governorates across the country and facilitate industrial development outside of the largest cities.