Valuing a supermarket or medium-surface food store in Morocco: the income approach

The single most expensive error on this asset class is to capitalise the passing rent as though it were a market rent. Everything else in the method exists to stop that from happening.

1. The context of the instruction

A representative brief: an owner holds the walls of an out-of-centre medium-surface food store, occupied under a lease by a grocery retail operator. He wants the market value of the asset — to weigh holding against selling or refinancing. The first thing a valuer does is not to measure the sales area. It is to settle the right basis of value and the right scope.

• Walls or business? Here we value the walls — the property — and not the occupier's business. The distinction governs everything that follows: the income relevant to the property is the rent, not the grocery margin.
• Let or vacant? An asset let to a solid occupier is not appraised like an empty shell. Value is built on the income in place, adjusted back to a sustainable market rent.
• Which basis of value? Market value in the great majority of cases — but the choice among the Red Book bases of value depends on the purpose the report will serve, and it is agreed with the client at the scoping stage.

2. Why the income approach — and not a rate per square metre

An average rate per square metre means nothing for this asset class: the value of a medium-surface store depends first on the income it generates and on the security of that income. The reference method is therefore income capitalisation, framed by RICS VPS 3. Transposed to the medium-surface store, the logic runs as follows.

• Step A — the sustainable market rent. The starting point is not the passing rent as it stands, but the rent an occupier would durably accept for this unit, on this pitch, in this condition.
• Step B — the net income. From the gross rent one deducts the outgoings the landlord cannot recover — major repairs, buildings insurance, a prospective void allowance, management costs — to reach the net income.
• Step C — capitalisation. That net income is capitalised at a yield reflecting the risk of the asset and the quality of the tenant; the way yields are set and hierarchised across segments is discussed in our note on capitalisation rates in Moroccan commercial property. Value is the net income divided by the yield.
• Cross-check. The result is set against comparable sales of retail walls and, for a highly specific shell, against depreciated replacement cost. A single method never concludes on its own.

3. The market rent and the occupier's rent-to-turnover burden

This is the heart of the analysis and the commonest source of error: capitalising the passing rent as though it were a market rent. A rent may be in place for historical reasons — an old lease, launch terms, a relationship between the parties — without corresponding to what the market would pay today. The valuer must therefore test its sustainability.

The instrument for that test is the rent-to-turnover burden: the relationship between the rent and the turnover of the store. A rent is durable only if it remains a reasonable share of the trade the unit makes possible. Where the passing rent absorbs an abnormally high proportion of sustainable turnover, it is not a market rent: the occupier will renegotiate it or leave, and the valuer adjusts it downwards. Conversely, a manifestly under-rented unit carries reversionary potential that a term and reversion analysis quantifies — see our note on valuing over-rented and under-rented property.

4. Re-lettability of the shell: the risk that sets the yield

Capitalising an income obliges you to ask: what is this building worth if the occupier leaves? That is the question of re-lettability, and it bears directly on the yield adopted. An asset that is easy to re-let carries a tighter yield; an asset that is hard to place carries a wider yield and a discount, because the risk of a prolonged void is real.

• Favourable characteristics: a simple standardised volume, generous clear height, a floorplate uncluttered by columns, loading docks and heavy-vehicle access, storage, and the capacity to be subdivided into smaller units. These are the strengths a shell shares with industrial and logistics property.
• Penalising characteristics: a configuration built to one occupier's specification, a pitch dependent on a single flow of trade, constrained access, a sales area that resists recompartmentalisation, and refrigeration or fire-safety standards that are costly for a successor to take on.
• The valuation consequence: re-lettability is not commented on, it is converted into figures — the choice of yield, the risk premium, and where appropriate a discount for a prospective void or for the cost of putting the shell back into a lettable state.

5. The car park and the site area: a trading parameter, not a detail

For an out-of-centre food store, parking is not an accessory: it is a condition of trading attractiveness, and therefore of the sustainable rent and of how easily the unit could be re-let. The ratio of parking spaces to sales area is an indicator a valuer checks as a matter of course.

• Parking capacity. A shortfall of spaces, constrained access or a poorly conceived internal circulation reduce potential turnover — and with it the rent the occupier can sustain.
• Site area. The reserve of land governs future extension, enlargement of the car park, or the addition of ancillary units. Surplus land may carry a value of its own, to be assessed against the zoning and the planning information note, on the logic set out in our article on land value, zoning and development potential.
• Visibility and access. Frontage, signage, connection to the main roads — all observed on site, and all feeding the view taken on the market rent.

The same reading applies at other scales across retail: to the ground-floor unit in a building, where pitch and flow outweigh gross area, and to the multi-let formats treated in our notes on regional shopping centres and retail parks, where vacancy across a rent roll replaces the single-occupier risk analysed here.

6. Site inspection and documentary checks

Before any calculation, the valuer secures the raw material. On a medium-surface store the asset-specific checkpoints are:

• The lease: unexpired term, rent and indexation, division of outgoings and repairs, break and exit provisions. A long lease with a solid occupier reduces the letting risk; a short or precarious one raises it.
• Technical condition: structure, weatherproofing, refrigeration and safety installations, the state of the car park and the accesses — everything that will weigh on outgoings and on what a successor would have to spend.
• The title position: land title, actual areas against registered areas, easements, charges. A discrepancy between the registered extent and what is on the ground is a first-order point of vigilance.
• Planning: permitted use, compliance of the buildings and of any extensions, and the constraints of the development plan.

7. The deliverable: a report that equips the decision

The instruction results in a report complying with Red Book standards, prepared by RICS-certified experts, setting out: the basis of value adopted, the sustainable market rent and the rent-to-turnover reasoning behind it, the capitalisation cascade, the treatment of re-lettability and of the car park, and the assumptions with their limitations. Standard delivery is 5 to 8 days (48-72 hours on the express service), with a firm quote within 24 hours, from 3,500 MAD excl. tax — the quotation for a medium-surface store depending on the area, on whether a lease is in place and on the complexity of the analysis.

What is the report for? To set a coherent sale price, and to negotiate on a documented basis. Its authority comes from nothing more mysterious than that: every input — rent, outgoings, yield, comparables, adjustments — appears with its source and its reasoning, so the conclusion is documented and verifiable line by linerather than presented as a single figure to be taken on trust. ReaConsult has been advising owners and investors since 2019, with more than 5,000 valuations completed, offices in 6 cities and a rating of 4.9/5 across 47 reviews. A private valuation informs a decision and an arm's-length negotiation.

Note:this article presents a worked example and a general methodological framework. No rent, yield, outgoings ratio or turnover multiple is quoted: the figures in the French original are labelled illustrative assumptions rather than market references, and they are rendered here qualitatively for that reason. The value of a real asset depends on its own circumstances, on the lease, on the local market and on the site and documentary checks. A private valuation informs a decision and an arm's-length negotiation. To instruct us, see our contact page or the property blog.