JLL Research Report

The Real Estate Market

A Year In Review 2019

Casablanca The Casablanca Real Estate Market A Year In Review 2019 03

Market 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.

Casablanca - Prime Rental Clock

Retail Office Retail

Office

Industrial Rental Rents Rental Rents Growth Falling Growth Falling Slowing Slowing

Rental Rents Rental Rents Growth Bottoming Growth Bottoming Accelerating Out Accelerating Out

Hotel* Hotel* Industrial H2 2018 H2 2019

* Hotel clock reflects the movement of RevPAR (Revenue per available room: ADR * occupancy rate) Casablanca 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 04 The Casablanca Real Estate Market A Year In Review 2019 The Casablanca Real Estate Market A Year In Review 2019 05

Office Retail

Supply Supply

2.10 0.05 89 More than 100,000 sq m of quality office space was 0.07 0.03 Total mall-based retail stock reached approximately 350 completed in 2019, bringing the total office stock to about 190,000 sq m by the end of 2019, with the completion 1.88 million sq m. Major completions in H2 2019 include of Le Mercato d’ in Dar Bouazza and the partial 280 Capital Office in the CBD (Abdelmoumen Boulevard), an opening of Sela Plaza by Aradei Capital in the same 66 office building within the Florida Centre Park development area. More retail facilities are shifting to the city in the business district of Sidi Maarouf and Yasmine outskirts as a result of the growing population and Signature Business Center (Tour Jasmin) in Casa Anfa. the migration flows from the city centre to the fast- 210 1.05 growing suburbs. More deliveries are expected over the coming years, 140 thereby enhancing the city office space supply and The expected future supply will add around 155,000 GLA (sq m million)

increasing competition. Major projects scheduled for sq m of retail GLA to the market by the end of 2022, GLA (sq m thousand) completion in 2020 include a 13,000 sq m GLA office with notable projects including the expansion of 70 building in the CBD (Bir Anzarane Boulevard), Parcel “R” in 1.69 1.72 1.77 1.88 1.88 1.95 1.98 Marjane Californie, Aeria Mall in Casa Anfa and Zenata 138 138 143 190 190 256 256 Casanearshore, and two office buildings within the Florida Shopping Centre which accounts for more than 40% Center Park Development. 0 of the expected future supply. 0 2016 2017 2018 2019 2020F 2021F 2022F 2016 2017 2018 2019 2020F 2021F 2022F The introduction of OPCIs is expected to stimulate capital Although some shopping malls may experience market activity after the relatively weak performance Current Supply Future Supply completion delays, the total mall-based retail stock is Current Supply Future supply achieved in 2019. The outlook remains generally positive expected to reach approximately 345,000 sq m of GLA for the coming years, with investment activity expected by the end of 2022. Source: JLL Source: JLL in the real estate market and growth in business activity driving demand for the office sector.

Performance Vacancy Performance Vacancy Rate 7% 7% Take-up of office space remained weak in the second 8% 10% Average rents of mall-based retail remained stable half of 2019, mainly due to the limited supply of in H2 2019 while vacancies declined to 7% from 9% quality office buildings. Average rents remained stable recorded in H1 2019. Significant retail space has been at approximately MAD 150 per sq m while vacancies absorbed in Anfa Place shopping Center as a result of increased slightly in H2 2019 to reach 10% compared H2 2018 H2 2019 major renovation works and the improvement of the H2 2018 H2 2019 to the 9% recorded in H1 2019. New office space retail mix of the mall. offer in prime locations such as Casa Anfa is being 12 month 12 month absorbed rapidly following project completions, with outlook Despite the low vacancies observed in the market, the outlook demand for further space in this area. business model of some shopping malls starts to show its limits and several retailers express their concern about declining sales. Weaker than expected GDP The market remained in favour of landlords in the Rents (MAD / sq m) Average Rents (% change) second half of 2019 where tenants were not inclined growth, combined with the growth of online shopping to relocate quickly. This trend may reverse in the and the intense competition from street retail lowers years to come with the delivery of new projects in growth prospects for shopping malls. the pipeline offering more attractive terms of lease, Shopping competitive lease rates, and alternative locations. 150 150 If traditional hypermarket chains have long been Malls considered as drivers of footfall, changes in consumer H2 2018 H2 2019 purchasing trends are forcing developers and 0% 0% operators of shopping malls to rethink their business Y-o-Y Y-o-Y 12 month models and find alternative differentiating concepts. 12 month outlook More focus needs to be placed on enriching visitors’ outlook experience with more space allocated to dining and entertainment.

Source: JLL Source: JLL 06 The Casablanca Real Estate Market A Year In Review 2019 The Casablanca Real Estate Market A Year In Review 2019 07

Hotel Industrial

Supply Supply 0.6 10.5 Around 700 keys were added to the market during 0.6 While no significant additions were recorded in 2019, several Name of Industrial Area Total Area (hectares) 2019, bringing the total hotel accommodation capacity 0.5 structured industrial zones are currently under development in Casablanca to around 8,700 keys. Major projects in Casablanca and its surrounding. Major projects under ZI Ain Sebâa- 600 completed in 2019 include Radisson Blu Hotel in development include Oulad Hadda industrial zone (840 ha) in the ZI Bernoussi – Zenata 513 the city centre and three Onomo hotels in various Province of Mediouna, and Ahl Loughlam industrial zone in Sidi 7.0 ZI Mohammedia 58 locations throughout the city. Bernoussi (10 ha). Other projects in the pipeline include Sahel- Lakhayayta industrial park (140 ha) carried out by the Moroccan PI Bled Solb – Chellalate 130 About 1,100 keys are expected to enter the market government and the Millennium Challenge Cooperation (MCA- ZI 29 ) and financed by the Sustainable Industrial Zones Fund in the coming 12 to 24 months, with major projects ZI Mediouna - Tit Mellil 135

including Hilton Garden Inn in Sidi Maarouf and Ibis (thousand) Keys (FONZID). The delivery of the first phase of Soft Group industrial 3.5 Hotel by Accor in the CBD. Other notable projects park (SOFTPark) in has experienced some delays ZI Had Soualem – Lakhyayta 26 in the pipeline include Canopy by Hilton on Anfa and has been pushed back to the first half of 2020. ZI Dar Bouazza 10 7.3 7.4 8.0 8.7 8.7 9.2 9.8 Boulevard and three hotel developments in Casa Anfa, PI Bouskoura 28 resulting from a partnership between Groupe Mfadel The limited availability of industrial land at a competitive price and Realites Afrique. 0 has long plagued industrial developments in Casablanca. In Aéropole de Nouaceur 210 2016 2017 2018 2019 2020F 2021F 2022F fact, a large portion of urban areas zoned for industrial use has PI Sapino 262 Casablanca hotel market will continue to expand, with never been developed, creating vehicles for land speculation. P2I Midparc 125 (Phase 1& 2) more than 20 hotels (1,700 keys) due to be added to Current Supply Future supply Through various programmes and public/private partnerships, the market over the next 3 years, most of which are the Moroccan Government has undertaken to facilitate access PI Ouled Saleh 32 urban mid-scale four-star developments. to land and provide functional infrastructure and services to Source: JLL Total 2,158 enhance sustainable industrial development and encourage more investments in the industrial sector.

Performance Occupancy Performance Average Rent of Industrial units / warehouses (MAD / sq m) 65% 58% The Casablanca hotel market continued to record Average industrial rents remained stable in 2019. We expect decreases in performance in YT November 2019. rents to decrease over the coming years with the development Average Daily Rates (ADR’s) reduced by 8% to register of new industrial zones proposing serviced land and industrial 50 50 USD 104 compared to the same period last year. facilities at very competitive rents. Occupancies also declined to 58% and Revenue Per YT November YT November H1 2018 H1 2019 Available Room (RevPAR) decreased by 18% to USD 2018 2019 The Finance Act for the year 2020 lays down several provisions 12 month 60 in YT November 2019, when compared to the same that aim to strengthen the industrial sector. The corporate 12 month outlook period last year. tax rate has been reduced from 31% to 28%, with further 0% outlook -700 bp reductions over the coming years to achieve a rate of 20%. Y-o-Y With the subdued business activity during 2019 and The Act also envisages the transformation of free zones into Y-o-Y the stagnation in the number of overnight stays, the Zones of Industrial Acceleration (ZAI) with a new framework ADR (USD) Average Rent of Serviced Land (MAD / sq m) rise in hotel accommodation capacity has created regulation. Newly located companies in these zones will a more competitive environment in the market continue to benefit from corporate tax exemption during the between the different operators and hotel categories. first five years of activity and a reduced rate of 15% beyond This combination of factors has exerted a downward 113 104 this period. Another important measure announced is the 6 6 pressure on prices especially for four-star and five-star creation of a new fund, with a budget envelope of MAD 6 hotels as they strive to remain competitive. Billion over three years, that is intended to support SMEs and YT November YT November micro-enterprises. Customs duties on imports will also be H1 2018 H1 2019 With more hotel rooms in the pipeline, weak demand 2018 2019 raised to protect domestic industries. 12 month 12 month growth should result in declines in occupancies, -8% outlook 0% outlook which will adversely impact revenues per available Y-o-Y room (RevPAR). Y-o-Y

Source STR Global Source: JLL 08 The Casablanca Real Estate Market A Year In Review 2019 The Casablanca Real Estate Market A Year In Review 2019 09

Property Clock Definitions

12 O’clock Office Retail Industrial

12 o’clock indicates a turning point towards • Figures are based on physical surveys • JLL data only includes space in retail • The industrial zones referred to in a market consolidation / slowdown. At this undertaken by JLL. The supply data malls and therefore does not cover the report are in accordance with the position, the market has no further rental covers major modern office premises, the majority of the current stock of Moroccan authorities, which are in line growth potential left in the current cycle, but not all of this space would be retail space in Casablanca, which with international standards. with the next move likely to be downward. considered Grade A by international comprises street front retail units, often standards. We monitor supply in 6 standalone or as part of mixed use • The areas of the 13 main industrial major areas across the city, namely (residential and commercial) towers. areas are estimated by JLL. Historic City Centre (CVH), Central Business District (QCA), City Entrance • Data on retail vacancies are based on (Sidi Maarouf), Casanearshore, Casa Morocco Mall, Anfaplace Shopping Anfa and Ain Diab (La Corniche). These Center, and Tachfine Center. 9 O’clock 3 O’clock include purpose built offices and an allowance for office space in mixed use Hotels 9 o’clock indicates the market has reached 3 o’clock indicates the market has reached buildings. Our estimate of future supply the rental growth peak. While rents may its point of fastest decline. While rents may only includes purpose built offices that • Hotel room supply is based on existing continue to increase over coming quarters continue to decline for some time, the are currently under construction. the market is heading towards a period of rate of decrease is expected to slow as the supply figures provided by the Egyptian Hotel Association as well as future rental stabilisation. market moves towards a period of rental • Rents: The basket of office buildings hotel development data tracked by stabilisation. in Casablanca reflects the prime office JLL Hotels. Room supply includes all buildings. The data relates to quoted graded hotel supply and excludes (asking rents) on a net basis (exclusive serviced apartments, in addition to of service charges, tax and other removing all the floating hotels which charges). led to the decline in overall supply figures. 6 O’clock • STR performance data is based on 6 o’clock indicates a turning point towards a sample of internationally branded rental growth. At this position, we believe midscale and upscale hotel properties. the market has reached its lowest point and the next movement in rents is likely to be • Average Daily Rates (ADR) and Revenue upwards. Per Available Room (Rev Par) are the key performance metrics. Definitions 10 The Casablanca Real Estate Market A Year In Review 2019

Casablanca

Espace les Palmiers Building, 2nd floor Ibnou Toufail street, 13 Palmiers district 20340, Casablanca, Morocco Tel: +212 5 20447700 Fax: +212 5 20447701

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

Dana Salbak Walid Riahi Majdouline Cheikh Head of Research, MENA Senior Analyst, Morocco Marketing & PR Manager, Morocco [email protected] [email protected] [email protected]

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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.