TARIK EL HARRAQUI

Morocco 2020/21 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Tarik El Harraqui, Director General of CBRE, about Moroccan real estate, economic rebound, and goals for 2022.

What has been the main impact of the pandemic for CBRE, and, overall, what is your perspective of Morocco's real estate sector?

It was a challenging period for us, the same with everyone else. The 1st impact was due to the lockdown. This period was relatively difficult, though the market later in the year began to pick up, as the restrictions started to be lifted. As CBRE has multiple types of services, each area has seen a different impact from this crisis. During this period, developers only focused on urgent matters. Feasibility studies for new developments or investments were not anymore, a priority. As per sales & transactions, the closing of sales centers clearly impacted the activity. In term of office transactions, we have seen a significant drop of 70-75% in 2020 for Casablanca city, when compared to 2019. During this period, most of our assignments were however related to tenant representation for lease renegotiation. As per our investment advisory division, however, we were able to maintain most of the transactions that we were working on with our clients. We made some large investment transactions in 2020 in the industrial sector.

What is your assessment of the economy's ability to bounce back?

The forecast of GDP growth relies on global economic forecast but also on government-backed strategy to assist the economy. And when we look at those items, the signals are still positives. The government was quick to respond to most of the issues generated by the pandemic. On the economic side with the government recovery plan (12 billion dollars announced) or on the health side with the face-mask production or the vaccine campaign. Morocco is first in Africa in terms of the percentage of vaccinated people. As Morocco is an economy that is open to international trades and rely on international demand, the recovery relies on the ability to quickly reach a health stability.

What is your assessment of your sector's ability to bounce back?

Travel and tourism sector are one of the most impacted in the economy. These sectors, which counted for 7% of Morocco GDP and 5% of Morocco jobs in 2019, have seen a decrease of more than 65% of the travel revenues. It should be noted that, despite the reopening of borders, the international tourism activity remains low as mobility is still limited. As per real estate, the impact depends on the asset class. For commercial real estate (mainly lease transactions), we are seeing a pickup in the first quarter of 2021; however, figures still do not match pre-pandemic levels. We hope 2022 will see an increase of international corporate demand which is our core business. Regarding residential real estate (mainly sale transactions), the COVID impact added complications to the initial picture. In fact, before the COVID the demand was already not growing at the same pace as the supply. The supply increased strongly over the past 5 years with the change of urban planning regulations of several areas and the arrival of new generation of developers. Finally, if we look at investment in income generating properties, it's the other way around, as the demand continues to exceed the supply. This was the case before the pandemic and continues to be so. When we have a yield-generating investment product to sell, the demand is still there. There are still institutional investors, insurance companies, looking for yield generating properties. They have the liquidity and want to invest in secure income-generating properties.

What is your early impression of the New Model for Development, and what it might mean for CBRE and your sector?

Our sector is like all the other strategic sectors in Morocco. Its growth is related to all the government incentives and strategies that continue to enhance the overall business environment. The environment is already fairly advanced in comparison to other regional countries. These government initiatives continue to promote private investment and structure the real estate environment and urban planning. Real estate depends on government-backed incentives as well as private investment. For me, our industry changes depending on the type of players present. We are moving from “old school" real estate investors and developers to a new generation of investors and developers. We are seeing successful developers putting more thinking and market research into their strategy. It's a new generation of developers, more demand focused, and investing in research & development. The real estate demand evolves, and it was important for developers to follow the new trends. The COVID crisis only increased this situation. We have also new types of investors through real estate and investment trusts. We see more fund managers, REIT, listed vehicles etc. All of that is a change in the business environment with a positive impact. All we need is more investment activities and transactions taking place.

What are the goals and expectations of CBRE for the rest of this year as well as into 2022?

After this wave, we all have the same vision: to start growth again. Everyone's focus in 2020 was to reduce the impact of COVID-19, so cost management in light of reduced revenues in the overall economy was a priority. Now, we have to adjust our forecast to be more conservative during this uncertainty times, while also planning a mid-term pick up. Our vision is to focus on our core strength to develop our business in order to continue growing. We want to reach new markets and regions. To do that, first we need to consolidate our base and focus on our core businesses. We want to continue to focus on regional growth. Most of our activity is also related to international corporate clients. We have global agreements with international companies, so they often call us when they want to enter Morocco or Africa in general. Once the global market pickup these corporate clients will redevelop their presence in the region. The company is positive about the future in the region. Africa is still an emerging market with projections of being a growth, and not a steady, market. Africa has become a key area for our growth and our objective is to be leader in the continent.