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* Global firms slim down and retreat from Egypt
* About 25 pct of top office space vacant in Cairo - report
* Egypt's loss will be sub Saharan Africa's gain - propertyexperts
* Some developers seek to convert schemes to residential
By Praveen Menon and Tom Bill
DUBAI/LONDON, Sept 26 (Reuters) - A flight by foreigncompanies from violent unrest in Egypt threatens to drive upvacancy rates at offices and malls and prompt internationalinvestors to shift funds to sub-Saharan real estate.
The army overthrew and imprisoned President Mohamed Mursi inJuly and the ensuing crackdown on his Muslim Brotherhoodmovement has killed about 900 people. This has prompted manymultinational companies to scale down their operations or pullout staff, particularly from central areas of the capital Cairo.
Weaker demand means property investors, who had been luredby Cairo's established business district, could swap what wasnorth Africa's only viable property investment market forcomparatively stable cities in sub-Saharan Africa, propertyexperts said.
"The demand for Class A office space has almost disappearedovernight," said Ahmed Badrawi, managing director of SODIC, one of Egypt's biggest developers and behind theEastown scheme in New Cairo, a development of offices, shops andhomes twice the size of London's 97-acre Canary Wharf district.
The list of firms that have cut or suspended operations inEgypt, sold off businesses or pulled out staff in recent monthsincludes Apache Corp, Chevron, General Motors, Electrolux, BASF, BG Group and BP.
A series of developments that tried to capitalise on ashortage of high-quality offices in Cairo have recently beencompleted while others are under construction, but there aredoubts over whether they will fill up.
About 25 percent of the best office space in Cairo isvacant, property consultant Jones Lang LaSalle said inJune, a figure that it said would grow by an unspecified amount.It compares with 7 or 8 percent in central Paris or London.
RENTS FALL
Rents for the best Cairo offices have fallen to $40 persquare metre per month from $50 since 2009 while retail rentshave plunged to $100 per square metre per month from $150, datafrom real estate consultant Knight Frank shows.
"If office leases in Cairo expire and tenants are looking torenew there are going to be some pretty frank discussions withthe landlord and I'd expect a major impact on new deals," saidPeter Welborn, Knight Frank's managing director of Africa,saying tenants may seek cuts of a third to a half.
There is no data for overseas investment into Egyptianproperty but the flow of recent years has ground to a halt sincethe military crackdown, property experts said.
South African funds led the charge buying existing buildingsin Egypt, attracted by yields, or rent as a percentage of theproperty's value, of about 7 percent versus about 5 percent inthe United Arab Emirates. Buyers included funds linked to RandMerchant Bank and Stanbic Bank, a division of Standard Bank.
Meanwhile, Gulf developers sought to capitalise on a lack ofhigh-quality offices and malls and now risk getting theirfingers burned by an excess of supply, said Habiba Hegab, ananalyst at Cairo-based Beltone Financial.
They include Dubai's largest developer Emaar Properties which is building the Uptown Cairo scheme, a luxurydevelopment of homes, hotels and golf courses in MukkattamHills, overlooking the sprawling capital.
Others include Dubai mall developer Majid Al Futtaim,privately-held Dubai firm DAMAC and state-owned Qatari Diar.
Emaar said Egypt remained a core market and its operationswere "ongoing as scheduled". Al Futtaim and DAMAC declined tocomment, and Qatari Diar was not available for comment.
SWITCH TO RESIDENTIAL MARKET
It is a far cry from several years ago when retailers andmall developers were eager to tap into Egypt's 85 million-pluspredominantly-young population, many of who aspire to Westernshopping habits, by building Dubai-style mega-malls.
Military curfews in a city that revels in late-nightshopping means many retailers are revising plans and JLLestimates the current mall vacancy rate of 25 percent will riseas more developments complete.
Talks to bring luxury brands like Harrods, Gucci and Pradato Egypt, are also on hold, real estate sources said.
Egypt's loss could be sub Saharan Africa's gain, KnightFranks' Welborn said, citing cities like Lusaka in Zambia, Accrain Ghana, Lagos in Nigeria and Nairobi in Kenya.
"There is a lot of Gulf money looking for a home in NorthAfrica and sub-Saharan Africa. I'll suggest you'll now see moregoing into sub-Saharan Africa," he said.
Egypt's housing sector has proved more resilient and couldsoften the blow for developers able to convert schemes.
Helped by a weak currency and a volatile stock market, people are investing in housing to preserve wealth, anote by bank HSBC said earlier this year. Residentialsale prices and rentals increased by 8 percent in the secondquarter versus 2012, JLL said.
Developers hastily redesigning projects include SODIC, whichhas cut the office and retail space at its Eastown scheme. "That(residential) will be our bread and butter for a little while,"Badrawi said.
It will not be enough on its own to lure back foreign money,Welborn said.
"The Arab Spring was supposed to bring a higher level ofinterface between the man in the street and the politicians buthas effectively chased away overseas investors."
