Setting the market rent in Morocco: the rental value method

A quoted rent is an asking figure, not a concluded one. Market rent is what genuinely comparable properties genuinely let for, recently, in the same area.

1. The right rent is the sustainable rent — not the highest

The landlord's first mistake is to reason from the top: “I saw a listing at that figure in the district, I will aim for the same”. But a listing is an asking price, not a concluded rent — and the advertised property may have neither the same area, nor the same floor level, nor the same condition as yours. The market rent is the figure at which genuinely comparable properties genuinely let, recently, in the same area.

That rent must also be sustainable: payable over time by a solvent tenant, and consistent with the competing supply. A fair rent shows three signs — it lets quickly, it renews without a crisis, and it resists negotiation. It is this same notion of rental value that serves as the reference everywhere else: at a rent revision during a lease as much as in the calculation of a real yield.

2. Two symmetrical risks: too low, too high

• Too low: yield lost, and hard to recover. An initial rent set below the market drags on for a long time. In Morocco the catch-up is framed by the rules: revision on residential lettings under law 67-12, or the capped three-yearly revision on commercial leases under law 49-16, almost never corrects in one step a gap allowed to settle in over several years. And a passing rent below the market weighs on the value of the property if it is sold tenanted — which is the whole subject of the term and reversion method.
• Too high: the void, which costs more than the discount. A rent above the market does not hold: the property stays empty, the outgoings keep running, and you end up discounting anyway. One void month already removes close to 8% of the annual income: aiming for 5% more rent and ending up with two empty months is a losing trade.

The target is therefore not a single figure but a narrow range: the top of the range for a property ready to let and well positioned, the bottom to relet quickly or to offset a defect. The whole point of the method is to reduce that range to a defensible width.

3. The comparison method: the reference

Rental value is established principally by comparison — exactly as market value is, but on letting transactions rather than sales. The reasoning runs in four stages:

• Gather relevant comparables: recent lettings of similar properties — type, specification, period — in the same area. Favour rents actually concluded, and treat advertised figures with caution, since they usually sit above the rent achieved.
• Reduce them to a homogeneous basis: relate each rent to the weighted floor area (see the next section), so that properties of different size and configuration can be compared at all.
• Adjust, item by item: correct each comparable for the differences against your property — floor level, condition, aspect, specification — in a documented way.
• Conclude a range: and position your property within it according to its real strengths and weaknesses.

Where the property justifies it — a business unit, an investment block — the comparison is cross-checked against income capitalisation, to verify that the rent adopted is consistent with the yield the market expects. That is also where market value, rental value and reinstatement value part company: see our comparison of market value, rental value and reinstatement value.

4. Weighted floor area: not every square metre is equal

Lining up rents on a gross “per square metre” basis distorts the comparison, because not every square metre carries the same rental value. A habitable living room does not let like a terrace, a balcony, a cellar or a parking space. Weighted floor area corrects that bias: it assigns each type of space a weight reflecting its real contribution to the rent, so that properties can be compared on a homogeneous basis.

No weighting coefficient is universal: it is assessed case by case, according to the property, its configuration and the local market. That is precisely what an off-the-cuff opinion cannot do and what a valuation documents. The same logic of area and configuration governs the estimate of the property's own value, as set out in our guide to which floor area really counts in the price of a flat.

5. Condition and micro-location: the two variables that move the rent

Once the basis of comparison is established, two variables explain most of the rent differences between neighbouring properties:

• The real condition of the property. Wear, quality of finishes, equipment, works to be expected: a refurbished, ready-to-live-in home lets for more, and faster, than a tired one in the same location. Conversely a defect in condition imposes a discount — and concealing it only lengthens the void.
• Location, at fine grain. Not merely the city or the district, but the street, the aspect, the floor level, the view, the quiet, access to transport and services. Two identical flats in the same building can support different rents according to floor and orientation.

These two variables are also the ones that weigh most heavily on voids and turnover: a rent calibrated on a “theoretical” property better placed or better maintained than yours will be paid for in empty months. The method consists in starting from the condition and the location as observed, not as wished for.

6. Rent hoped for against rent collected: the calculation to run first

Setting a market rent is not enough: you still need to know what it actually returns. Between the headline rent and the net income sit several items — voids, non-recoverable charges, maintenance, management and other recurring outgoings. That is the whole subject of gross versus net rental yield, and the trap into which an investor falls by trusting the headline gross figure alone.

In concrete terms: an ambitious rent that generates voids can produce a lower net yield than a more modest one that lets continuously. The right figure is the one that maximises net income over the holding period, voids included — not the one that maximises the first month's rent. A worked rental yield case study in Casablanca illustrates the full reasoning, from market rent to the real net.

7. Beyond the figure: steering value, delegating operations

Setting the right rent is a decision about value; collecting it, handling the tenant, the receipts and the maintenance is operational management. They are two distinct trades. At ReaConsult, day-to-day operational management is handled by partner managers; we steer value: market rent at letting and at each renewal, asset value, and the arbitrage between letting, selling and reconfiguring.

For the resident landlord, calibrating the rent avoids voids and renegotiations. For the investor, it is the most sensitive input in the yield calculation. For the owner deciding from abroad, it is the only way not to depend on a rent quoted “on trust” by a third party: a documented rent replaces an estimate from memory.

Our rental value reports are produced by RICS-certified experts, comply with RICS standards, and set out the comparables retained and every adjustment applied. Fees start at 3,500 MAD excl. tax.

Note: this article describes a method for determining market rent; the figures cited — the weight of a void, weighted floor areas — are illustrative and are assessed case by case according to the property and the local market. Any letting remains framed by the texts in force (law 67-12 for residential lettings, law 49-16 for commercial leases): confirm your own position with your lawyer or your notary. Operational management — tenants, collection, maintenance — is handled by partner managers; ReaConsult steers value. To document the rental value of your property, see our contact page or the property blog.