Tunisia

Subdued activity in the residential sector

Tunis’ prime residential locales are predominantly in the northern and eastern precincts, notably Les Berges du Lac I & II, Carthage and La Marsa. While Carthage and La Marsa are renowned for offering traditional villa-style residences, Les Berges Du Lac presents many apartment alternatives.

The recent economic stagnation, evidenced by contractions in the final two quarters of 2023, has cast a shadow over the residential real estate sector. Notably, rental prices for upscale properties have consistently declined over the past two years, averaging around 5% per annum. Although sale prices have also experienced a downward trend, the decline's magnitude has been mitigated. This phenomenon can be attributed to the high construction costs and demand from a few local investors seeking refuge against inflationary pressures, coupled with the diaspora capitalising on advantageous exchange rates to delve into real estate acquisitions.

Concurrently, the deceleration in demand has prompted developer caution in launching new projects into the market. Consequently, the prevailing sentiment in the industry is "wait and see", with minimal market activity anticipated in the short to medium term.

Office recovery threatened by economic conditions

Office activity in Tunis centres around Les Berges du Lac I & II, Centre Urbain Nord, the Central Business District, Monplaisir, and Belvedere. La Pearl du Lac, nestled between Les Berges du Lac and the city centre, is currently under development. This emerging district has garnered attention from financial institutions and insurance companies, as evidenced by land acquisitions to develop their own flagship headquarters.

Preceding the COVID-19 pandemic, vacancy rates in Tunis's prime office market hovered between 5% to 10%. However, the landscape has since been characterised by a conspicuous lack of demand, compounded by corporate downsizing. Initially attributed to the pandemic's repercussions, the present downturn in demand can be predominantly attributed to poor economic performance, resulting in businesses reducing staff numbers. Vacancy rates are estimated to reach 25% to 30%.

The industrial sector dominated by lower-grade stock

Tunisia's industrial landscape benefits significantly from its strategic proximity to Europe and its relatively low labor costs, which make it an attractive destination for manufacturing and logistics operations. However, recent political upheavals have deterred investment, severely impacting the sector.

These disruptions have created an uncertain business environment, discouraging both local and foreign investors from committing to long-term industrial projects.

Tunis, the capital, features several strategically located industrial areas designed to leverage logistical advantages. The Charguia area, situated near the airport on the city's north side, and the Chotrana zone are notable examples. The majority of industrial activity, however, is concentrated in the southern part of the city, particularly in the Goulette-Marsa Free Zone near Megrine. Additionally, the El Mghira area to the southwest specializes in aerospace industries, while the southeastern region near the port of Tunis also serves as a significant industrial hub. Beyond Tunis, major industrial zones are found in Bizerte to the north and Sfax to the south. Despite these well-positioned areas, the industrial real estate market is dominated by lower-grade stock, with a shortage of Grade A facilities. Low rental rates and sale prices, coupled with an abundance of secondhand space, have hindered speculative construction and are expected to suppress significant price growth in the short to medium term.

Sluggish retail growth

Tunis has witnessed a scarcity of retail development over the past five years. The prominent retail destinations include Tunisia Malls 1 and 2 in Les Berges du Lac II, alongside Géant and Carrefour Malls in La Marsa. Beyond the confines of Tunis, notable retail hubs include Azur City in Sousse and Ibn Khaldoun Mall in Sfax.

Like other sectors, there have been a number of challenges, including the devaluation of the local currency, which has catalysed a direct inflationary impact on retail sales and exacerbated the prevailing headwinds. This predicament is particularly pronounced within the malls, where most retailers specialise in imported merchandise.

Premium malls have relatively stable occupancy rates, hovering around 70-80%. However, the enduring preference amongst Tunisians for local shops underscores the perception of malls as high-priced venues.