Morocco
The Morocco Property Market
Source: Oxford Business Group
A higher profile proves a key asset
Morocco is a low-income country attempting to restructure its economy away from an agricultural base and towards more stable sources of growth. Sectors targeted for growth include industrial development, construction, services and outsourcing.
The diversification process has begun to pay off, with GDO growth of 7.3% in 2006, up from 1.7% in 2005. Strong ties with the US, liberalization of the economy, and an inflow of funds form Moroccans working abroad - $5bn in 2006, compared to $3.5bn in 2005 - have all contributed, as have increased levels of foreign direct investment (FDI) - $2.5bn in 2005, up by 19% - and new laws permitting property ownership by foreign nationals.
The construction sector has also been an important element, contributing 12% of GDP in 2006. A 10% rise in demand for construction materials and an increase of 25% in the number of mortgages contracted by banks illustrates the buoyancy of the sector.
Compared to most markets in the Middle East and North Africa (MENA) region, construction in Morocco is regarded as low-risk, with domestic capacity to supply construction materials and maintain costs a major strength.
Real estate has been targeted as an FDI-friendly sector, with the government offering competitive tenders to secure public-private partnerships in order to deliver low- and middle-income housing projects.
Resort development has also encouraged the entry of many of the large Gulf developers, with projects of a size and scale entirely new to the market.
Key developers
Foreign developers have been attracted by the privatization and public offering of state-owned land, which initially covered 56,000 ha. FDI generated purely from real estate reached in $241m in 2006, or 15% if total FDI.
The Plan Azur to create resorts in Saidia (Berkane), Lixus (Larache), Mazagan (El Haouzia, El Jadida), Mogador (Essaouira), Taghazout (Agadir) and Plage Blanche (Guelmin) has resulted in concessions being awarded to four international developers.
Residential
A number of factors are responsible for the buoyant residential property market in Morocco. Morocco is home to some 33.7m people, and the populations is growing at a compound annual growth rate (CAGR) of 2%.
The urbanization of the populations is also continuing apace, placing increasing pressure on housing in urban centres. Demand for high-end segments is seen in tourist areas such as Casablanca, Marrakech, Tangiers and Rabat. These markets experience demand from the French, Spanish, and British, as well as Gulf Arabs and Moroccan expatriates working abroad, all looking for second homes.
Morocco offers great advantages for second homes for Europeans: costs are about two-thirds cheaper than the European Mediterranean coast; Morocco is close to Europe; and there is easy transport to many European destinations.
Upcoming supply is insufficient to meet a decades-old shortfall, and additional demand has of course worsened the situation. As a result, prices have more than doubled over the past five years, rising by an estimated 30% annually in prime locations. However, prices are still below prevailing rates in other MENA countries. High-end units costs between $1,000 per sq. metre and $1500 per sq metre.
Rental yields range between 6% and 8%. Contrary to the sale market, the rental market is fragmented and inefficient, composed of individually built units. Mostly non-contract-based, which restricts movement. Rent control policy in the form of a \"no improvement work, no rent rise\" system, and tax policies have somewhat disenchanted large private investors in the rental market. However, the situation is gradually changing, with some new tax incentives and the entry of fully-fledged property consultancies.
The share of owners to tenants has changed drastically in the past 30 years, from owners comprising 35.5% of residents on urban households in 1971 to 56.8% in 2005. The share of tenants has reduced drastically from 53.1% in 1971 to 29.2% in 2004, a very low number.
There are several reasons for this, including a reduction in bank lending rates. Another problem was a lack of owner protection in rental agreements, which the government addressed by passing a law to reduce eviction time for non-paying tenants.
As the rental market develops and demand rises, no easing of pressure is foreseen in the short run. The Ministry of Housing estimates that 1m units are required in order to fill the demand-supply gap. Around 850,000 units are planned, though these will not be released for another four to five years.
As such, the residential segment is bullish and is anticipated to leap ahead. Major projects include the Saidia coastal project, with 3,000 high-end apartments and villas to be completed by 2013; the Spanish Fedesa project in Ayamonte, involving 7,000 housing units; and Al Houra Resort, with 199 apartments and 415 villas.
Also planned are the Emaar and ONA Group Bahia Bay golf community, scheduled for 2011, a 330-ha development including residential units, hospitality, and a marina; and the Al Omrane development, Tasmena, which is scheduled to be completed in 2015, which will include 48,000 middle-income housing units and some 1400 low-income units.
Commercial
The commercial sector is an early stage of development, as Morocco has only recently opened up its economy. The country is seen more and more as a regional hub for transportation, transit and business.
The nascent opportunities in real estate, finance and manufacturing, as well as the current emerging offshore outsourcing businesses, have created a remarkable inflow of forieng companies to Morocco, led by US concessionaries and resulting in an expansion in the employment base. Unemployment has fallen from 11% in 2003 to 7% in 2006, creating a total workforce if 11m in the country.
There is a huge scarcity in the office market, especially for upper-grade spaces. Casablanca hosts the traditional central business district and has quality office space, and increased demand is demonstrated by the absorption of newly completed office buildings, such as the Casablanca Twin Centre.
Vacancy rates have been falling and rents rising in several locations. Rates range between $20 per sq metre and $30 per sq metre for grade-A space. Commercial yields are published at 8-9%. The Caisse de Depot et de Gestion has been entrusted with creating facilities and infrastructure for offshore services. Several projects are underway and are expected to spark the evolution of a competitive office sector.
Among these are Casablanca\'s Casanearshore, which will deliver 35,000 sq. metres over the next three years, to be followed by Rabat Technopolis, TangierShore and MarrakechShore, all targeting information and communications technology firms. The growth of the office sector is directly proportional to the growth of the offshore sector, and the demand for new offices will depend on how fast the outsourcing industry can take off in the kingdom.
Hospitality
Tourist development is a part of the government\'s \"Vision 2010\" plan, which aims to attract 10m tourists to the country by 2010, with an increase in revenues from the current $4.5bn to $7bn annually.
The government intends to invest $12bn in order to achieve these goals. To increase the number of tourists. The government has been taking steps to improve visitor numbers from new markets, such as China and the US.
American visitors increased by 9% in 2006. Currently, most foreign tourist are from France (39%), Spain (22%), Belgium (6%), and Arab countries (4%), with the rest mainly coming from other European countries.
The government is also trying to ensure a higher standard of tourism facilities by encouraging renovation of existing hotels and reclassifying hotels to conform with international standards.
Over the past five years, foreign tourist arrivals - predominantly leisure - grew at CAGR of 10%, and 2006 witnessed a dramatic increase of 17%, to reach 3.6m, from 3.1m in 2005. This boom in the sector creates potential in the hospitality market, now commanding high occupancy and profits.
Occupancy rates rose to 49% in 2006 from 39% in 2003, while prices were reported to rise by 10%. By the end of 2006, total bed capacity was 133,320, with an estimated 60% in the four- and five-star categories.
Vision 2010 aims to create 80,000 hotel room, of which 65,000 will be located on the coast, and the remaining inland at cultural destinations. High-end hotels will be complemented by guest houses and self-catering cottages in order to provide the market with a diverse set of accommodations.
The government has introduced a number of tourist attractions, such as windsurfing, parachuting, hunting and sea canoeing. Meetings, incentives conventions and exhibitions tourism is also being developed with the establishment of huge convention facilities in the area. All of these have opened investment opportunities for hotels and other related developments, as globetrotters begin noticing that Morocco is now one of the hottest destinations in the world.
Several hotel establishments have already committed to build in the country, projects in the pipeline include a five-star hotel in Amwaj, hotels in Marina Casablanca, and several other developments.
Large real estate development investments originating from within the Middle East will also have a huge impact on Moroccan tourism, with many of the projects including a hospitality component and the knock-on effect from other activities - residential, leisure and commercial- are expected to boost Morocco as a holiday destination. Upcoming supply is not expected to be enough to cater for demand, and therefore the market has great investment potential.
Retail
The retail market is building a strong foundation in Morocco. Market growth of 22.5% over five years (2001-05) stem from the emergence of a middle class with higher disposable incomes and new patterns of consumption. The arrival of clothing and shoe franchises has expanded the market to 308 chains operating within nearly 2000 outlets.
However, the sector is still undeveloped, with only a few shopping malls, most of which are small in size, and the market remains dominated by street-front shops. Retailing in concentrated in Casablanca and Rabat. The popularity of hypermarkets and supermarket is increasing, influenced by the appeal of the one-stop shop concept.
As demand grows for high-end retail space, property prices are on the rise, with retail spaces in Casablanca and Rabat commanding between $2,500 and $5,000 per sq metre. Facilities are improving - Mega Mall in Rabat is offering space for rent in return for management, administrative and marketing services.
Banks are now offering franchising loans at 6.95% interest up to seven years, and will cover up to 70% of the total investment, which is expected to boost the multi-chain system. This creates the potential for new retail space in the market, with Vision 2010 planning to develop shopping malls in order to attract tourists.
Overall, the Moroccan retail property market offers sizeable opportunities especially for good concepts in prime locations. At the same time, the large share currently occupied by the informal economy and the competition from counterfeit and contraband products pose a structural challenge to the industry, despite brand awareness spreading through the population.
Source: Oxford Business Group
A higher profile proves a key asset
Morocco is a low-income country attempting to restructure its economy away from an agricultural base and towards more stable sources of growth. Sectors targeted for growth include industrial development, construction, services and outsourcing.
The diversification process has begun to pay off, with GDO growth of 7.3% in 2006, up from 1.7% in 2005. Strong ties with the US, liberalization of the economy, and an inflow of funds form Moroccans working abroad - $5bn in 2006, compared to $3.5bn in 2005 - have all contributed, as have increased levels of foreign direct investment (FDI) - $2.5bn in 2005, up by 19% - and new laws permitting property ownership by foreign nationals.
The construction sector has also been an important element, contributing 12% of GDP in 2006. A 10% rise in demand for construction materials and an increase of 25% in the number of mortgages contracted by banks illustrates the buoyancy of the sector.
Compared to most markets in the Middle East and North Africa (MENA) region, construction in Morocco is regarded as low-risk, with domestic capacity to supply construction materials and maintain costs a major strength.
Real estate has been targeted as an FDI-friendly sector, with the government offering competitive tenders to secure public-private partnerships in order to deliver low- and middle-income housing projects.
Resort development has also encouraged the entry of many of the large Gulf developers, with projects of a size and scale entirely new to the market.
Key developers
Foreign developers have been attracted by the privatization and public offering of state-owned land, which initially covered 56,000 ha. FDI generated purely from real estate reached in $241m in 2006, or 15% if total FDI.
The Plan Azur to create resorts in Saidia (Berkane), Lixus (Larache), Mazagan (El Haouzia, El Jadida), Mogador (Essaouira), Taghazout (Agadir) and Plage Blanche (Guelmin) has resulted in concessions being awarded to four international developers.
Residential
A number of factors are responsible for the buoyant residential property market in Morocco. Morocco is home to some 33.7m people, and the populations is growing at a compound annual growth rate (CAGR) of 2%.
The urbanization of the populations is also continuing apace, placing increasing pressure on housing in urban centres. Demand for high-end segments is seen in tourist areas such as Casablanca, Marrakech, Tangiers and Rabat. These markets experience demand from the French, Spanish, and British, as well as Gulf Arabs and Moroccan expatriates working abroad, all looking for second homes.
Morocco offers great advantages for second homes for Europeans: costs are about two-thirds cheaper than the European Mediterranean coast; Morocco is close to Europe; and there is easy transport to many European destinations.
Upcoming supply is insufficient to meet a decades-old shortfall, and additional demand has of course worsened the situation. As a result, prices have more than doubled over the past five years, rising by an estimated 30% annually in prime locations. However, prices are still below prevailing rates in other MENA countries. High-end units costs between $1,000 per sq. metre and $1500 per sq metre.
Rental yields range between 6% and 8%. Contrary to the sale market, the rental market is fragmented and inefficient, composed of individually built units. Mostly non-contract-based, which restricts movement. Rent control policy in the form of a \"no improvement work, no rent rise\" system, and tax policies have somewhat disenchanted large private investors in the rental market. However, the situation is gradually changing, with some new tax incentives and the entry of fully-fledged property consultancies.
The share of owners to tenants has changed drastically in the past 30 years, from owners comprising 35.5% of residents on urban households in 1971 to 56.8% in 2005. The share of tenants has reduced drastically from 53.1% in 1971 to 29.2% in 2004, a very low number.
There are several reasons for this, including a reduction in bank lending rates. Another problem was a lack of owner protection in rental agreements, which the government addressed by passing a law to reduce eviction time for non-paying tenants.
As the rental market develops and demand rises, no easing of pressure is foreseen in the short run. The Ministry of Housing estimates that 1m units are required in order to fill the demand-supply gap. Around 850,000 units are planned, though these will not be released for another four to five years.
As such, the residential segment is bullish and is anticipated to leap ahead. Major projects include the Saidia coastal project, with 3,000 high-end apartments and villas to be completed by 2013; the Spanish Fedesa project in Ayamonte, involving 7,000 housing units; and Al Houra Resort, with 199 apartments and 415 villas.
Also planned are the Emaar and ONA Group Bahia Bay golf community, scheduled for 2011, a 330-ha development including residential units, hospitality, and a marina; and the Al Omrane development, Tasmena, which is scheduled to be completed in 2015, which will include 48,000 middle-income housing units and some 1400 low-income units.
Commercial
The commercial sector is an early stage of development, as Morocco has only recently opened up its economy. The country is seen more and more as a regional hub for transportation, transit and business.
The nascent opportunities in real estate, finance and manufacturing, as well as the current emerging offshore outsourcing businesses, have created a remarkable inflow of forieng companies to Morocco, led by US concessionaries and resulting in an expansion in the employment base. Unemployment has fallen from 11% in 2003 to 7% in 2006, creating a total workforce if 11m in the country.
There is a huge scarcity in the office market, especially for upper-grade spaces. Casablanca hosts the traditional central business district and has quality office space, and increased demand is demonstrated by the absorption of newly completed office buildings, such as the Casablanca Twin Centre.
Vacancy rates have been falling and rents rising in several locations. Rates range between $20 per sq metre and $30 per sq metre for grade-A space. Commercial yields are published at 8-9%. The Caisse de Depot et de Gestion has been entrusted with creating facilities and infrastructure for offshore services. Several projects are underway and are expected to spark the evolution of a competitive office sector.
Among these are Casablanca\'s Casanearshore, which will deliver 35,000 sq. metres over the next three years, to be followed by Rabat Technopolis, TangierShore and MarrakechShore, all targeting information and communications technology firms. The growth of the office sector is directly proportional to the growth of the offshore sector, and the demand for new offices will depend on how fast the outsourcing industry can take off in the kingdom.
Hospitality
Tourist development is a part of the government\'s \"Vision 2010\" plan, which aims to attract 10m tourists to the country by 2010, with an increase in revenues from the current $4.5bn to $7bn annually.
The government intends to invest $12bn in order to achieve these goals. To increase the number of tourists. The government has been taking steps to improve visitor numbers from new markets, such as China and the US.
American visitors increased by 9% in 2006. Currently, most foreign tourist are from France (39%), Spain (22%), Belgium (6%), and Arab countries (4%), with the rest mainly coming from other European countries.
The government is also trying to ensure a higher standard of tourism facilities by encouraging renovation of existing hotels and reclassifying hotels to conform with international standards.
Over the past five years, foreign tourist arrivals - predominantly leisure - grew at CAGR of 10%, and 2006 witnessed a dramatic increase of 17%, to reach 3.6m, from 3.1m in 2005. This boom in the sector creates potential in the hospitality market, now commanding high occupancy and profits.
Occupancy rates rose to 49% in 2006 from 39% in 2003, while prices were reported to rise by 10%. By the end of 2006, total bed capacity was 133,320, with an estimated 60% in the four- and five-star categories.
Vision 2010 aims to create 80,000 hotel room, of which 65,000 will be located on the coast, and the remaining inland at cultural destinations. High-end hotels will be complemented by guest houses and self-catering cottages in order to provide the market with a diverse set of accommodations.
The government has introduced a number of tourist attractions, such as windsurfing, parachuting, hunting and sea canoeing. Meetings, incentives conventions and exhibitions tourism is also being developed with the establishment of huge convention facilities in the area. All of these have opened investment opportunities for hotels and other related developments, as globetrotters begin noticing that Morocco is now one of the hottest destinations in the world.
Several hotel establishments have already committed to build in the country, projects in the pipeline include a five-star hotel in Amwaj, hotels in Marina Casablanca, and several other developments.
Large real estate development investments originating from within the Middle East will also have a huge impact on Moroccan tourism, with many of the projects including a hospitality component and the knock-on effect from other activities - residential, leisure and commercial- are expected to boost Morocco as a holiday destination. Upcoming supply is not expected to be enough to cater for demand, and therefore the market has great investment potential.
Retail
The retail market is building a strong foundation in Morocco. Market growth of 22.5% over five years (2001-05) stem from the emergence of a middle class with higher disposable incomes and new patterns of consumption. The arrival of clothing and shoe franchises has expanded the market to 308 chains operating within nearly 2000 outlets.
However, the sector is still undeveloped, with only a few shopping malls, most of which are small in size, and the market remains dominated by street-front shops. Retailing in concentrated in Casablanca and Rabat. The popularity of hypermarkets and supermarket is increasing, influenced by the appeal of the one-stop shop concept.
As demand grows for high-end retail space, property prices are on the rise, with retail spaces in Casablanca and Rabat commanding between $2,500 and $5,000 per sq metre. Facilities are improving - Mega Mall in Rabat is offering space for rent in return for management, administrative and marketing services.
Banks are now offering franchising loans at 6.95% interest up to seven years, and will cover up to 70% of the total investment, which is expected to boost the multi-chain system. This creates the potential for new retail space in the market, with Vision 2010 planning to develop shopping malls in order to attract tourists.
Overall, the Moroccan retail property market offers sizeable opportunities especially for good concepts in prime locations. At the same time, the large share currently occupied by the informal economy and the competition from counterfeit and contraband products pose a structural challenge to the industry, despite brand awareness spreading through the population.
