Analysis of H1 2024 vs. 2023

Prepared by QLC Real Estate

Executive Summary

The Maltese commercial real estate (CRE) market showed notable variations across sectors in the first half of 2024, with location-specific and property-type differences. This white paper compares the performance of the CRE market in H1 2024 against 2023, focusing on office spaces, retail, industrial properties, and adding a detailed review of the catering and hospitality sector. All findings are based on data sourced from QLC Real Estate's internal transaction records, providing an in-depth look at the market trends and shifts we observed across Malta’s CRE landscape.

1. Macroeconomic Overview

2023

Tourism Recovery: Malta's economic recovery from the pandemic was bolstered by a strong tourism rebound in 2023, particularly affecting the retail, catering, and hospitality sectors.
Business Sentiment: Increased foreign investment, particularly in the fintech and iGaming sectors, drove demand for office spaces in urban areas.
Interest Rates: Higher borrowing costs due to European Central Bank policies slowed down the expansion of new commercial property developments in 2023.

H1 2024

Tourism Surge: The first half of 2024 saw a robust increase in tourist arrivals, benefiting the retail and hospitality sectors, particularly in coastal and urban regions.
Sectoral Shifts: While fintech and iGaming continued to grow, other sectors such as catering and hospitality saw new developments, especially in prime tourist areas.
Inflationary Pressures: Inflation remained a challenge, affecting construction costs and property prices across Malta.

2. Office Space

2023

Demand Concentration: Office demand in 2023 was driven largely by multinational firms in Sliema, Valletta, and St. Julian’s. Suburban locations, including Mosta and Birkirkara, saw higher vacancy rates.
Rent Levels: Prime office locations had rents ranging from €240 to €300 per square meter annually, with moderate growth throughout the year.

H1 2024

Sector-Specific Growth: Growth in sectors such as fintech and iGaming spurred demand for Grade A office space in Valletta and Sliema, resulting in a 7% increase in rents.
Hybrid Work Model: The persistence of hybrid work models contributed to rising demand for flexible co-working spaces in urban hubs, while demand in suburban locations stagnated.
Rental Rates: Prime office rents increased slightly to €280-€320 per square meter annually, while secondary areas saw minor declines due to reduced demand.

3. Retail Property

2023

Recovery in Prime Areas: High street retail in Valletta, St. Julian’s, and Sliema saw strong performance in 2023, with rents increasing by 5-7%, largely due to increased tourist traffic.
Suburban Weakness: Locations like Marsa and Birkirkara struggled with higher vacancy rates and slower recovery post-pandemic.

H1 2024

Tourism-Fueled Growth: Retail demand in key tourist zones like Valletta and St. Julian’s saw a 9% increase in H1 2024, with rents rising to €400-€450 per square meter.
Emerging Retail Hubs: Gżira and Ta’ Xbiex witnessed an uptick in demand for boutique retail outlets, with rents growing by 3-5%.
Challenges in Suburban Retail: Despite a tourism boost, suburban retail areas like Birkirkara and Attard continued to struggle, showing vacancy rates of over 15%.

4. Industrial & Logistics Property

2023

Supply Constraints: In 2023, Malta’s industrial property sector faced significant supply shortages, particularly for warehousing and logistics spaces, which led to rising rents.
Demand Drivers: The growth of e-commerce and logistics played a pivotal role in driving up demand for industrial properties.

H1 2024

Tight Market Conditions: Supply constraints persisted into 2024, pushing rents further upward by 8-10%, especially in Hal Far and Marsa, where rents reached €100-€120 per square meter annually.
Sustainability Trends: There was increasing demand for eco-friendly industrial properties, with larger logistics companies seeking green certifications for their facilities.

5. Catering and Hospitality Sector

2023

Tourism Recovery Phase: The catering and hospitality sector began its recovery in 2023, with hotels, restaurants, and catering services seeing an uptick in demand driven by increased tourist arrivals.
Rental Growth: Prime hospitality locations in St. Julian’s, Valletta, and Sliema saw average rental growth of 6-8% due to the influx of tourists and rising occupancy rates.

H1 2024

Tourism Boom: A surge in tourist arrivals in H1 2024 fueled demand for new restaurants, hotels, and bars in coastal and urban regions, driving rental growth by an additional 10%.
Location-Specific Growth:
- Valletta and St. Julian’s: These areas saw the highest rental growth for restaurants and hotels, with rents for premium locations rising to €500-€600 per square meter annually.
- Qawra and Bugibba: Coastal regions experienced growth in mid-range hospitality businesses, with rental increases of 5-7%.
Emerging Trends: There was a notable rise in demand for specialized dining experiences, including eco-friendly and themed restaurants, particularly in tourist-heavy areas.

6. Location-Specific Analysis

Valletta

Office Space: Valletta’s office market remained highly competitive in H1 2024, with demand from legal, financial, and fintech sectors driving rents higher.
Retail & Hospitality: Sustained tourist demand drove growth in both restaurant and retail spaces.

Sliema & St. Julian’s

Office & Retail: These areas continued to dominate Malta’s office and retail markets, particularly for international businesses and high-end retail.
Hospitality: Significant growth in luxury hotels and fine dining establishments.