A Year In Review 2019

JLL Research Report

Casablanca

The Casablanca Real Estate Market

The Casablanca Real Estate Market A Year In Review 2019 03

Casa

blanc

aMarket Summary

Real estate market activity remained weak during the second half of 2019, with reduced transactions across all asset classes. Only a few deliveries occurred largely within the office sector, with further completions expected in the short and medium term. The growing number of quality large-scale projects demonstrates the increasing maturity of the office market. The retail sector is showing signs of saturation in the city, driving retail facilities to the outskirts. Despite the weak performance of the hotel market, the sector continues its expansion with the development of new projects. The next 12-24 months are likely to see further downward pressure on rents and prices, as supply across all asset classes increases.

One of the major highlights during the second half of 2019 was the issuance of the first approval of the draft regulations for the management of the CDG Premium Immo managed by Ajarinvest, a locally registered Moroccan REIT (OPCI). This authorisation granted by the Financial Market Authority (AMMC) is paving the way for a new investment vehicle that has proven to be very popular in other markets.

* Hotel clock reflects the movement of RevPAR (Revenue per available room: ADR * occupancy rate) Note: The property clock is a graphical tool developed by JLL to illustrate where a market sits within its individual rental cycle. These positions are not necessarily representative of investment or development market prospects. It is important to recognize that markets move at different speeds depending on their maturity, size and economic conditions. Markets

will not always move in a clockwise direction, they might move backwards or remain at the same point in their cycle for extended periods. Source: JLL

Casablanca - Prime Rental Clock

H2 2018 H2 2019

Hotel*Industrial

Retail

Office

RentalGrowth

Slowing

Rental Growth

Accelerating

RentsFalling

Rents BottomingOut

RentalGrowth

Slowing

Rental Growth

Accelerating

RentsFalling

Rents BottomingOut

Hotel*

Industrial

Retail Office

The Casablanca Real Estate Market A Year In Review 2019 The Casablanca Real Estate Market A Year In Review 2019 0504

More than 100,000 sq m of quality office space was completed in 2019, bringing the total office stock to about 1.88 million sq m. Major completions in H2 2019 include Capital Office in the CBD (Abdelmoumen Boulevard), an office building within the Florida Centre Park development in the business district of Sidi Maarouf and Yasmine Signature Business Center (Tour Jasmin) in Casa Anfa.

More deliveries are expected over the coming years, thereby enhancing the city office space supply and increasing competition. Major projects scheduled for completion in 2020 include a 13,000 sq m GLA office building in the CBD (Bir Anzarane Boulevard), Parcel “R” in Casanearshore, and two office buildings within the Florida Center Park Development.

The introduction of OPCIs is expected to stimulate capital market activity after the relatively weak performance achieved in 2019. The outlook remains generally positive for the coming years, with investment activity expected in the real estate market and growth in business activity driving demand for the office sector.

Supply

Take-up of office space remained weak in the second half of 2019, mainly due to the limited supply of quality office buildings. Average rents remained stable at approximately MAD 150 per sq m while vacancies increased slightly in H2 2019 to reach 10% compared to the 9% recorded in H1 2019. New office space offer in prime locations such as Casa Anfa is being absorbed rapidly following project completions, with demand for further space in this area.

The market remained in favour of landlords in the second half of 2019 where tenants were not inclined to relocate quickly. This trend may reverse in the years to come with the delivery of new projects in the pipeline offering more attractive terms of lease, competitive lease rates, and alternative locations.

Performance

Source: JLL

0

1.05

2.10

1.69 1.72 1.77 1.88 1.88

0.050.03

1.95 1.98

0.07

GLA

(sq

m m

illio

n)

2016 2018 2019 2021F 2022F2017

Current Supply

2020F

Future Supply

Source: JLL

Vacancy

10%

H2 2019

12 month outlook

8%

H2 2018

Rents (MAD / sq m)

12 month outlook

150

H2 2018

150

H2 2019

Office Retail

Supply

Performance

Source: JLL

Vacancy Rate

Average Rents (% change)

H2 2018

7%

H2 2019

12 month outlook

Shopping Malls

0%Y-o-Y

7%

0

70

140

210

280

350

138 143 190 256

89

66

256190138

GLA

(sq

m th

ousa

nd)

2016 2018 2019 2021F 2022F2017

Current Supply

2020F

Future supply

Total mall-based retail stock reached approximately 190,000 sq m by the end of 2019, with the completion of Le Mercato d’Anfa in Dar Bouazza and the partial opening of Sela Plaza by Aradei Capital in the same area. More retail facilities are shifting to the city outskirts as a result of the growing population and the migration flows from the city centre to the fast-growing suburbs.

The expected future supply will add around 155,000 sq m of retail GLA to the market by the end of 2022, with notable projects including the expansion of Marjane Californie, Aeria Mall in Casa Anfa and Zenata Shopping Centre which accounts for more than 40% of the expected future supply.

Although some shopping malls may experience completion delays, the total mall-based retail stock is expected to reach approximately 345,000 sq m of GLA by the end of 2022.

Average rents of mall-based retail remained stable in H2 2019 while vacancies declined to 7% from 9% recorded in H1 2019. Significant retail space has been absorbed in Anfa Place shopping Center as a result of major renovation works and the improvement of the retail mix of the mall.

Despite the low vacancies observed in the market, the business model of some shopping malls starts to show its limits and several retailers express their concern about declining sales. Weaker than expected GDP growth, combined with the growth of online shopping and the intense competition from street retail lowers growth prospects for shopping malls.

If traditional hypermarket chains have long been considered as drivers of footfall, changes in consumer purchasing trends are forcing developers and operators of shopping malls to rethink their business models and find alternative differentiating concepts. More focus needs to be placed on enriching visitors’ experience with more space allocated to dining and entertainment.

Source: JLL

12 month outlook

0%Y-o-Y

The Casablanca Real Estate Market A Year In Review 2019 The Casablanca Real Estate Market A Year In Review 2019 0706

Source: JLL

Around 700 keys were added to the market during 2019, bringing the total hotel accommodation capacity in Casablanca to around 8,700 keys. Major projects completed in 2019 include Radisson Blu Hotel in the city centre and three Onomo hotels in various locations throughout the city.

About 1,100 keys are expected to enter the market in the coming 12 to 24 months, with major projects including Hilton Garden Inn in Sidi Maarouf and Ibis Hotel by Accor in the CBD. Other notable projects in the pipeline include Canopy by Hilton on Anfa Boulevard and three hotel developments in Casa Anfa, resulting from a partnership between Groupe Mfadel and Realites Afrique.

Casablanca hotel market will continue to expand, with more than 20 hotels (1,700 keys) due to be added to the market over the next 3 years, most of which are urban mid-scale four-star developments.

Supply

The Casablanca hotel market continued to record decreases in performance in YT November 2019. Average Daily Rates (ADR’s) reduced by 8% to register USD 104 compared to the same period last year. Occupancies also declined to 58% and Revenue Per Available Room (RevPAR) decreased by 18% to USD 60 in YT November 2019, when compared to the same period last year.

With the subdued business activity during 2019 and the stagnation in the number of overnight stays, the rise in hotel accommodation capacity has created a more competitive environment in the market between the different operators and hotel categories. This combination of factors has exerted a downward pressure on prices especially for four-star and five-star hotels as they strive to remain competitive.

With more hotel rooms in the pipeline, weak demand growth should result in declines in occupancies, which will adversely impact revenues per available room (RevPAR).

Performance

Hotel

Source: JLL

Occupancy

YT November 2018

58%

YT November 2019

12 month outlook

65%

113

YT November 2018

104

YT November 2019

0

3.5

7.0

10.5

7.3 7.4 8.0

0.60.6

9.88.7 9.2

0.5

8.7

2016 2018 2019 2021F 2022F2017

Current Supply

2020F

Future supply

Keys

(tho

usan

d)

ADR (USD)

12 month outlook

While no significant additions were recorded in 2019, several structured industrial zones are currently under development in Casablanca and its surrounding. Major projects under development include Oulad Hadda industrial zone (840 ha) in the Province of Mediouna, and Ahl Loughlam industrial zone in Sidi Bernoussi (10 ha). Other projects in the pipeline include Sahel-Lakhayayta industrial park (140 ha) carried out by the Moroccan government and the Millennium Challenge Cooperation (MCA-Morocco) and financed by the Sustainable Industrial Zones Fund (FONZID). The delivery of the first phase of Soft Group industrial park (SOFTPark) in Sidi Bernoussi has experienced some delays and has been pushed back to the first half of 2020.

The limited availability of industrial land at a competitive price has long plagued industrial developments in Casablanca. In fact, a large portion of urban areas zoned for industrial use has never been developed, creating vehicles for land speculation. Through various programmes and public/private partnerships, the Moroccan Government has undertaken to facilitate access to land and provide functional infrastructure and services to enhance sustainable industrial development and encourage more investments in the industrial sector.

Supply

Average industrial rents remained stable in 2019. We expect rents to decrease over the coming years with the development of new industrial zones proposing serviced land and industrial facilities at very competitive rents.

The Finance Act for the year 2020 lays down several provisions that aim to strengthen the industrial sector. The corporate tax rate has been reduced from 31% to 28%, with further reductions over the coming years to achieve a rate of 20%. The Act also envisages the transformation of free zones into Zones of Industrial Acceleration (ZAI) with a new framework regulation. Newly located companies in these zones will continue to benefit from corporate tax exemption during the first five years of activity and a reduced rate of 15% beyond this period. Another important measure announced is the creation of a new fund, with a budget envelope of MAD 6 Billion over three years, that is intended to support SMEs and micro-enterprises. Customs duties on imports will also be raised to protect domestic industries.

Performance

Industrial

Name of Industrial Area Total Area (hectares)

ZI Ain Sebâa-Hay Mohammadi 600

ZI Bernoussi – Zenata 513

ZI Mohammedia 58

PI Bled Solb – Chellalate 130

ZI Moulay Rachid 29

ZI Mediouna - Tit Mellil 135

ZI Had Soualem – Lakhyayta 26

ZI Dar Bouazza 10

PI Bouskoura 28

Aéropole de Nouaceur 210

PI Sapino 262

P2I Midparc 125 (Phase 1& 2)

PI Ouled Saleh 32

Total 2,158

Source STR Global

6

H1 2018

6

H1 2019

Average Rent of Serviced Land (MAD / sq m)

12 month outlook

50

H1 2018

50

H1 2019

Average Rent of Industrial units / warehouses (MAD / sq m)

12 month outlook

-700 bpY-o-Y

-8%Y-o-Y

0%Y-o-Y

0%Y-o-Y

The Casablanca Real Estate Market A Year In Review 2019 The Casablanca Real Estate Market A Year In Review 2019 0908

Definitions

Definitions

12 O’clock

12 o’clock indicates a turning point towards a market consolidation / slowdown. At this position, the market has no further rental growth potential left in the current cycle,

with the next move likely to be downward.

9 O’clock

9 o’clock indicates the market has reached the rental growth peak. While rents may

continue to increase over coming quarters the market is heading towards a period of

rental stabilisation.

3 O’clock

3 o’clock indicates the market has reached its point of fastest decline. While rents may

continue to decline for some time, the rate of decrease is expected to slow as the market moves towards a period of rental

stabilisation.

6 O’clock

6 o’clock indicates a turning point towards rental growth. At this position, we believe

the market has reached its lowest point and the next movement in rents is likely to be

upwards.

Property Clock

Office

• Figures are based on physical surveys undertaken by JLL. The supply data covers major modern office premises, but not all of this space would be considered Grade A by international standards. We monitor supply in 6 major areas across the city, namely Historic City Centre (CVH), Central Business District (QCA), City Entrance (Sidi Maarouf), Casanearshore, Casa Anfa and Ain Diab (La Corniche). These include purpose built offices and an allowance for office space in mixed use buildings. Our estimate of future supply only includes purpose built offices that are currently under construction.

• Rents: The basket of office buildings in Casablanca reflects the prime office buildings. The data relates to quoted (asking rents) on a net basis (exclusive of service charges, tax and other charges).

Retail

• JLL data only includes space in retail malls and therefore does not cover the majority of the current stock of retail space in Casablanca, which comprises street front retail units, often standalone or as part of mixed use (residential and commercial) towers.

• Data on retail vacancies are based on Morocco Mall, Anfaplace Shopping Center, and Tachfine Center.

Hotels

• Hotel room supply is based on existing supply figures provided by the Egyptian Hotel Association as well as future hotel development data tracked by JLL Hotels. Room supply includes all graded hotel supply and excludes serviced apartments, in addition to removing all the floating hotels which led to the decline in overall supply figures.

• STR performance data is based on a sample of internationally branded midscale and upscale hotel properties.

• Average Daily Rates (ADR) and Revenue Per Available Room (Rev Par) are the key performance metrics.

Industrial

• The industrial zones referred to in the report are in accordance with the Moroccan authorities, which are in line with international standards.

• The areas of the 13 main industrial areas are estimated by JLL.

The Casablanca Real Estate Market A Year In Review 2019 10

For questions and inquires about the Casablanca real estate market, please contact:

Dubai, Abu Dhabi, Cairo, Riyadh, Jeddah, Al Khobar, Johannesburg

With MEA offices in:

COPYRIGHT © JONES LANG LASALLE IP, INC. 2020.This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report.

Dana SalbakHead of Research, MENAdana.salbak@eu.jll.com

Casablanca

Espace les Palmiers Building, 2nd floorIbnou Toufail street, 13Palmiers district20340, Casablanca, MoroccoTel: +212 5 20447700Fax: +212 5 20447701

Walid RiahiSenior Analyst, Moroccowalid.riahi@eu.jll.com

Majdouline Cheikh Marketing & PR Manager, Moroccomajdouline.cheikh@eu.jll.com