The discussion surrounding an oversupply of office spaces and supermarkets in Malta, as highlighted by an article in the Times of Malta on September 5, is far more complex than the binary viewpoints typically presented.
While property developers are understandably focused on selling or leasing their own projects, us real estate agents, who work closely with a wider range of clients, are better positioned to offer a broader and more informed perspective. This article seeks to provide a balanced view on this issue, drawing on our expertise and observations of the commercial real estate market.
The current debate in Malta is not unique. Similar discussions are taking place in numerous countries worldwide, largely driven by the widespread adoption of remote working during the pandemic. The shift to more flexible work arrangements has significantly impacted the demand for office space across the globe.
In Malta, the decrease in office space demand is particularly noticeable in larger offices, typically those above 400 square meters. However, it’s important to note that larger markets overseas have been hit harder than ours.
While Malta does have some larger office spaces, most of our market consists of substantially smaller units, so the problem is much less pronounced. Although demand for these smaller offices has also softened, it has been far less severe.
Refurbished spaces with modern amenities and parking are still in demand, reflecting a more nuanced reality.
The economic impact of ongoing geopolitical tensions in Europe and the Middle East cannot be ignored. These conflicts have contributed to rising inflation and a more cautious investment climate globally. As a result, demand for office spaces has softened but, again, this is a global issue, not a problem confined solely to Malta.
Despite these challenges, Malta’s economy has fared relatively well compared to other countries, particularly in sectors like hospitality and fast-moving consumer goods (FMCG), which includes supermarkets. This sector is still experiencing notable growth, in contrast to the general trend of declining office demand.
Should we be concerned about the steady influx of new businesses, particularly in retail and supermarkets? We align with the perspective of Michael Stivala, who advocates for a free market without restrictive regulations. Serious business owners conduct thorough due diligence before making substantial investments.
Demand for office spaces has softened but this is a global issue- Simon Rajan Bharwani
If they are confident in their business models, then the market should be allowed to operate freely. Competition drives innovation and, ultimately, benefits consumers, so it is vital to avoid artificial constraints.
In addition to the disruptions caused by the pandemic and geopolitical tensions, technological advancements are also reshaping our economic landscape. As consumer habits continue shifting towards online shopping, traditional demand for retail spaces has naturally declined. However, this shift is not all negative.
Retailers who have embraced the need for an enhanced customer experience are investing in larger, more dynamic retail spaces to differentiate themselves from competitors.
While demand for larger office spaces may be shrinking, there is a growing appetite for flexible co-working environments. The gig economy’s expansion, coupled with a rising number of freelancers seeking greater autonomy, and the increasing presence of digital nomads, are all contributing factors to a surge in demand for co-working spaces. This trend is likely to persist and strengthen in the coming years, with 2025 poised for further growth in this sector.
One of the first suggestions put forward by our CEO, Michael Bonello soon after he was re-elected to lead the Estate Agents Section within the Malta Development Association last May, was to convert old office blocks into residential housing projects aimed at providing affordable rental options to workers and others who prioritise cost savings.
This is a very relevant idea that can be brought about through legislative changes, and I am informed that the EAS remains open to discuss this further with the statutory stakeholders to bring about effective change.
In conclusion, while Malta is not immune to the global challenges impacting office and retail space demand, our commercial real estate sector remains a resilient and adaptable market. By embracing competition, innovation and change, it can continue to thrive in this evolving landscape.
Simon Rajan Bharwani is chief of commercial real estate at Alliance Real Estate Group.