The price of office rentals are down by up to a fifth, signalling a troubling time for the sector, according to a leading industry figure.
RE/MAX chairman Kevin Buttigieg told Times of Malta that over the last year and a half there had been a sharp drop in the price of office rentals.
“Prices of commercial rents have gone down 15 to 20 per cent in the last year and a half, and that’s a conservative estimate,” he said.
“Office spaces are definitely in difficult times – there was a time when we didn’t even have enough stock for all the enquiries, but that’s not the case anymore,” said Buttigieg.
“Just from people in the business I know personally, I know there are around 50,000 to 80,000 square metres of office space coming onto the market in the next few years – and we haven’t even used all the stock we currently have.”
Buttigieg said that with an increasing number of employees working from home in the post-COVID climate, there was less demand for office space, adding some workers might not even be in Malta.
“The employees that are working at home are also working from other countries, so this has also contributed to the office space decline as the companies do not need so much office space,” he said.
Describing the industry as having enjoyed a “massive boom” starting in the 2000s, the real estate boss warned the boom was now ending and, while “not completely dead”, it was in trouble.
However, Buttigieg stressed that such difficulties were not confined to Malta, with a similar picture seen “all over the world”. Malta was actually faring better compared to others, which were “down in all sectors”.
“At present, the only part of the [Maltese] industry which is hurting is office space – both for leases and sales; retail, residential lettings and residential sales are very stable,” he said.
'After COVID there was a price correction'
QuickLets and Zanzi Homes founder Steve Mercieca agreed the country had gone from having an undersupply of commercial properties to having a surplus, with prices impacted by the change.
“There used to be an undersupply, so everyone was renting for the same price. But after COVID there was a price correction, which was fuelled by an oversupply in the market,” he said.
According to data provided by Mercieca, out of the 3,677 total office listings online, 2,905 are currently available, suggesting an occupancy rate of around 20%.
The same data shows that only 17% of the office spaces listed last year were rented.
Mercieca thinks one of the problems facing the industry is landlords with lower quality offerings being unwilling to revise their prices downwards. They hadn’t adjusted to the new realities of the sector, which now included newer and more upmarket developments.
“People holding on to older properties need to realise that the market has moved and revise their prices accordingly,” said Mercieca.
However, he rejected the suggestion that the office market was in trouble, stressing that last year had been his company’s “best year” for office rentals.
At a Malta Business Network event that took place last month, industry experts blamed rising inflation, higher interest rates and a lack of market transparency for what they said was Malta’s commercial property market showing signs of faltering.
Speaking at the event, Hili Properties managing director George Kakouras said: “We should worry a lot about the office space... the pressure is here.”