Palm Hills, Egypt's second-largest listed real estate developer, will begin investing in commercial properties next year and expand its residential operations to meet higher anticipated demand, its co-chief executive said.

The return of foreign investors scared away by nearly four years of political turmoil is raising expectations for the company, which turned a corner after facing client cancellations and investigations into previous state land sales following a popular uprising in 2011.

A flight by foreign companies from violent unrest following the overthrow of elected President Mohamed Mursi in mid-2013 threatened to drive up vacancy rates at offices and malls and prompt international investors to shift funds to other markets.

But Tarek Abdel-Rahman said a nascent economic recovery fuelled by foreign investors - which the government is courting with structural reforms and an array of mega-projects - was creating demand for commercial space.

"With all these investments coming from the Gulf and coming from the West, sooner or later they will establish a foothold here," he told Reuters in an interview at his office.

He did not say how much Palm Hills planned to invest in commercial property - a new business area for the company.

Egypt's economy is set to grow 3.3 per cent this fiscal year, according to economists polled by Reuters, who nudged up their forecasts as confidence has started to return. The projection is close to the government's prediction of 3.5 per cent growth.

Gulf Arab allies have supported Egypt with billions of dollars in aid since Mursi's ousting.

Investors have more recently eyed Egypt's food industry, with bids from Kellogg Company, Dubai-based Abraaj Investment Group, and Denmark's Arla Foods.

The real estate sector has also seen activity, with the UAE's Aabar Investments and New York-based private equity firm Ripplewood taking stakes in Palm Hills this year.

Palm Hills has said it is targeting up to 35 per cent of its revenues over the next three to five years to come from commercial properties.

It also plans new investments in its core activity of residential development, and is considering land purchases in east Cairo where current inventory is expected to have been sold by June.

The company, reported a 152-per cent jump in third-quarter net profits last month propelled by a spike in sales after it delivered more properties to market, including a billion pounds worth of sales in vacation homes on the north coast.

"The more foreigners come in and invest, the more people have jobs, the more they have money, the more they can buy real estate," said Abdel-Rahman.

"People are more optimistic. They think the country's going in the right direction."-Reuters