The supply of offices in the country is showing signs of outpacing demand, experts have warned.

Rising inflation, higher interest rates and a lack of market transparency were all blamed for Malta’s commercial property market showing signs of faltering.

And a surge in employees wanting to work from home against a property landscape dominated by undesirable office environments was not helping, they said.

Speaking at panel discussion organised by the Malta Business Network on Monday evening, experts warned that despite the market’s healthy growth in previous years, questions were now being asked about its future.

Hili Properties managing director George Kakouras said: “We should worry a lot about the office space... the pressure is here.”

Speaking about the quality of office offerings, he stressed that those properties not able to “offer something special” would suffer more, potentially impacting their financial sustainability.

“If they cannot offer something unique, then what are they doing there? Because, even if they are occupied, then the leases will be so cheap that the investment put into those properties will never pay off,” Kakouras said.

'Exponential' growth

PwC Malta director Angelique Spina said that despite “exponential” growth in Malta’s commercial property market in recent years, driven by the gaming and financial services sectors, high inflation and interest rates had led to stakeholders questioning the future of the market.

She also highlighted a “lack of transparency in the market” with an absence of available data leading to foreign investors questioning the yield of commercial properties. “Unfortunately, it’s not as transparent as one would like it to be,” she said.

Spina said that, though the market was faring well so far, there was “a lot of supply” combined with signs of the market slowing down, leading to a likely “gap” between the number of available properties and demand for them.

This, she said, was driving a “flight towards quality” with companies increasingly shopping around for better offerings that more suit their needs.

However, Spina noted that, with around only 250 commercial property transactions taking place each year, Malta’s office market remained relatively small.

From left: Ian Casolani, Angelique Spina, Lara Camilleri, Catherine Hurley and George Kakouras.

Inviting offices or work from home?

Lara Camilleri, COO of HR solutions firm Expedition42, said employees wanted to carry through working from home arrangements, rolled out during the COVID-19 pandemic, something most important to the younger generations.

“It’s certainly a reality,” she said but noted it wasn’t appropriate to all sectors, identifying human resources and manufacturing as examples of industries incompatible with remote working.

The HR expert also highlighted occasions when working from home was not convenient or realistically possible, identifying those who share an apartment with friends – a common occurrence among foreign nationals – as one example.

“The likelihood they’re going to be able to work from home is very limited and often they will tell you that themselves,” she said.

Catherine Hurley, head of global accounts at AIS Interiors, stressed that creating better commercial property offerings revolved around creating “serendipitous opportunities and meetings”.

She said games rooms, collaborative spaces and access to technology were all things that could help encourage workers to want to return to the office, with moderator and Belair Property managing director Ian Casolani remarking such features had been popularised in Malta by the gaming industry.

However, Hurley said it was important these offer experiences workers can’t get at home, rather than simply being “gimmicks”.