Guide to Buying or Renting a Commercial Property in Malta
Commercial property in Malta is specialised as a sector, with premises types divided into usage classes. It is important to get the right classification premises for the type of business you operate, otherwise you will be facing a lengthy process of re-classification until it is just right for you.
Do your research, make use of the services of a dependable commercial agent with a solid reputation and do not hesitate to call in help of other professionals related to the core business you are looking to operate. It is important that both parties are familiar with all the facts and legalities when they engage in matters of securing the rental of or purchase of commercial business premises, so be informed as much as you can.
As location is always the primary factor when dealing with any real estate, commercial or residential, a few things to keep in mind is that in Malta costs are calculated on a per m2 basis and things get easier to own property once you have lived in Malta for five years or more or if you are an EU citizen, so many businesspeople prefer to rent at first and then to buy commercial business premises later on.
If you are interested in renting or buying a commercial property in Malta, this article will be of great help.
Should You Rent or Buy a Commercial Property in Malta
When starting a business in Malta, it is always better to rent premises at first and to see what happens later on. Factors such as the below will play a role after you have been operating for a year or two and if you have a need to change, renting will make it easier to relocate your business. When reassessing whether they are continuing operations from the same premises, business owners often ask:
- Am I in the right location?
- Is my business successful and growing?
- Do I need additional physical space to expand the business?
- Is our target market the same?
In addition, if you are from outside the EU or have lived in Malta for less than five years, it will also be a better option to rent premises as the process is less complicated. In some cases, it may even be legally impossible to buy commercial premises if you are not in possession of an EU passport. A high transfer tax applies to commercial property as well, so in the case where you buy your property, it is advised to hold on to it for some time before selling.
Why Foreigners Choose Malta over Other EU Countries to Expand Their Businesses
Malta has long been favoured by foreign business owners as a location to set up or expand their business. There are several reasons for this, but the number one motivation is the favourable legal and tax system. Malta is well-known for its financial framework and online gaming and in addition the country has had bragging rights to a very stable credit rating for many years. This in itself provides a very favourable and high sense of stability when business owners choose Malta as a location.
Malta’s corporate tax rate stands at 35% and is in line with the rest of the EU, but what makes it very different and appealing are the rebates on offer to foreign business owners and their shareholders. Depending on individual scenarios, this can bring the tax rate on profits down to as little as 5%!
In general, there is less bureaucracy when opening a business and the only types of businesses that require licensing, are those whose operations include financial services or ones that specialise in anything medical. The registration procedures are simple and quick for most and many a business can get going in a matter of days, not months.
Setting up and establishing a business in Malta can be very advantageous as it provides access to the rest of the EU’s markets. Due to its geographic location, Malta is the ideal place to do business as it provides a mid-way point not only to the markets of the EU, but also to that of Africa and the Middle East. The cost of living in Malta is low, but the standard of living is very high making it very appealing to businesses and their employees. Foreign trade relations between Malta, the EU, Asia and the US are very strong and focus on technology, tourism, manufacturing and finance mainly.
Lastly, Malta has double tax treaties with many countries, meaning that in order to encourage international trade, these bilateral agreements on passive and active income resolves any potential issues regarding paying tax on the same amount twice.
Types of Commercial Real Estate Properties in Malta
- Office Space: CLASS 4 Permit
There are office spaces available all over the islands: from commercial clusters and hubs to stand-alone spaces in converted houses and villas. Choosing the best space for your business will entirely be determined by the type of business you are entering into. As examples, many legal and financial institutions have chosen Mriehel, Valletta, St. Julian’s and Sliema. Gaming and technology companies prefer the greater Sliema area or Smart City in Kalkara for instance, while some laboratories and manufacturing companies prefer to be located in the vicinity of the university for obvious reasons.
- Restaurants: CLASS 4C/D Permit (Depending on whether preparation takes place on-site)
Restaurants are found everywhere, from bustling cosmopolitan areas like Valletta and Sliema, to the smallest village and town squares. Restaurants come in all shapes and sizes, from quaint family-owned and run businesses to international fast-food chains. Depending on your choice of setup and who your target market will be, the choice of restaurants and venues are limitless.
Malta has a good balance between the amounts of restaurants for sale and for rent and those in outlying areas will be cheaper in both their rental and purchase price.
- Factories: CLASS 5A/B/C Permit
Class 5A is for light industry that includes product/process development, crafts etc. Class 5B is for general industry such as industrial processes and class 5C is for specialised industry that includes the processing of metals, minerals etc. As a business owner in this class, you will have to be very specific about traffic congestion, health & safety, any noise or air pollution generated or caused by your factory.
In general, factories in Malta are located in specific industrial areas or hubs, outside the perimeters of any residential areas.
- Warehouses: CLASS 6A/B Permit
As warehouses are generally used for storage and distribution, these are usually in close proximity to factories, the harbour and even the Freeport and international airport at Luqa. Warehouses can be simple lock-up storage spaces or very sophisticated with temperature-controlled spaces to open yards for the storage of shipping containers. Areas such as Ħal Qormi Hal Far are also popular.
- Hotels and Guest Houses: CLASS 3A/B Permit
This is another business type that can be found all over Malta. These can range in size from small, family-run businesses to glamorous multi-star hotels located on the best strips of land on the islands.
Depending one’s budget and target market, this thriving business sector in Malta contributes to a very large part of the economy. With millions of tourists visiting the islands of Malta and Gozo each year, international fairs and conventions bringing in attendees from around the globe and locals who like to escape the monotony of the working week, the hotels and accommodation sector in Malta is big business.
Every town and village usually have a good selection of guest houses and due to Malta and Gozo’s small sizes, no establishment is ever very far from the coast or any of its attractions.
- Shops: CLASS 4B Permit
This is described as retail premises of all goods and their display but excludes vehicles. Shops are found everywhere: concentrated in shopping centres, in neigbourhoods, in concentrated clusters along major routes and even on remote stretches of road. Once again, how big you want to go and depending on your target market, the size and location of shop you are after will prescribe the perfect fit for you.
How to Buy a Commercial Property in Malta
Purchasing property abroad, whether it is residential or commercial can seem complex and downright challenging and our best advice is to make use of the services of a reputable estate agent. They will act on your instructions; they know the local market and all the areas and are your best bet at finding the perfect property in the right location.
Malta’s real estate market has been bullish for some years now and this is unlikely to change. The Maltese believe in real estate as an investment rather than having money in the bank and this is a huge contributing factor to the success of the building industry and real estate market as a whole.
The purchasing of commercial real estate in Malta is a fairly uncomplicated and straight-forward process, protecting both the rights of buyers and sellers. An added bonus is that all contracts are done in either English or Maltese, whatever your preference is. As we said earlier, pairing with a qualified reputable estate agency will save you a lot of time and you will get the right property that suits your business interests.
Let’s look at the process of buying and some of the expenses you can expect:
First, you meet up with your commercial estate agent, sit with them and discuss your requirements. Once the agent has assembled a portfolio of candidates that may suit your business interests, go and see some of these properties to get a feel for what is on offer.
Simultaneously, make sure that you have started the process of completing all necessary documentation regarding your business and this is where your agent will be invaluable. They know all the notaries, the processes and state departments involved. Once you have decided on a property, you and the vendor need to come to an agreement regarding all the conditions and requirements. This will be the time where the ‘Konvenju’ or Preliminary Agreement will be drawn up. This is a legal contract that is binding and both parties agree to finalise the transaction by a certain date. Once this has been signed, the buyer needs to pay at least 1% of the stamp duty as part-payment and the rest of the full 5% upon signing the final deed. You will also be encouraged to pay a 10% deposit at this point.
There are currently concessions for first-time buyers on the first €150,000 of their purchase, so the 5% will be calculated on the balance. During this time, the appointed notary will carry out all due diligence procedures on the property. You will be expected to complete the process of getting a bank loan if you are applying for one. It will also be your responsibility to ensure that all the necessary permits are in order that applies to the business premises. The seller is also expected to fulfil all their responsibilities as contained and agreed upon in the Preliminary Agreement.
As a new business owner to Malta, this may be a trying time getting everything done yourself and this is where your partnership with a good commercial agent will be crucial. They can smooth the way in dealing with banks and getting for instance building permits sorted out.
Once everything has been completed, submitted and approved, it will be time to sign the Final Deed. You will be taken through the entire contract again and if everyone is in agreement, it will be time to pay the remainder of the purchase price, the remainder of the stamp duty and also the costs of the services of the notary.
How to Rent a Commercial Property in Malta
There are many benefits to renting business premises in Malta. You will be able to choose between restaurants, shops, showrooms and many more. Many of the properties will come fully furnished, ready to move into and for your business to start operating. Many of the premises on offer also come with value-added services such as existing infrastructure and technology, cleaning services, shared reception services and even their own support teams. This can save you a lot of time in setting up shop and getting ready to trade. Your commercial agent will be able to provide you with all the information regarding these options if this model suits your particular type of business.
As always, do your homework in conjunction with your agent and see that due diligence is part of the process before you put pen to paper. Ensure that you read the fine print and establish what will be in- or excluded from your rental and what you will be paying extra for. If you can, make sure that you have a very flexible exit clause in the contract, should you find out after some time that the property is not suitable for your business, or you may need to relocate due to other issues.
Things to Consider
As setting up a business anywhere in the world will require some substantial monetary investment, we have a handy list of things to pay attention to and consider. Over time your business will expand and grow, so it is imperative that you make the right decision from the start about the premises you are going to sign a lengthy lease on.
1. Location (accessibility, parking options, etc)
The location of your business will be key in its success. The address itself will be a reflection of a company’s status and bring some goodwill with it, so it is important that you make the right decision. Should you rely on walk-ins or for the public to come to your premises, then parking will be a priority. This will apply to retail shops, restaurants and eateries and even to those who are in the consulting business and need to see clients on a regular basis.
Although many a retailer can be found in a side street or even in residential neighbourhoods, the challenge here will be parking for your customers and you may also face some complaints from residents. A better option will be to look at premises that are located in a shopping centre or one that has lots of parking spaces nearby.
It will also be important that your premises are located in an area that has easy access to major arteries and is serviced by public transport.
If you are going to be in the manufacturing sector, then access to the public will be less important but you may still be looking at premises that can be easily accessed by delivery vehicles or premises that are in close vicinity to warehouses or storage.
Popular Areas for Business in Malta
- Valletta’s characteristics as a Business Centre
Here you will find the Palazzo Business Centre, Grand Central, Malta Office Services and Forni Business Centres.
Valletta is historic, a hive of activity and on the Grand Harbour. From here many financial and banking institutions, lawyers and immigration experts operate. It is Malta’s capital city and was also the EU’s Capital of Culture for 2018. It is one of the best places to have a business that focuses on tourism, walk-ins and definitely for those who want an instantly-recognisable global address.
- Sliema’s characteristics as a Business Centre
Here you will find the Piazzetta Business Plaza, The Ferries, Central and Sliema Business Centres amongst others.
Highly sought-after as an area, Sliema is popular, accessible and prestigious. Business Centres can include parking, open green spaces and stunningly beautiful sea views. If it is glamour and style with a perfect address that you are after, Sliema is it.
- St. Julian’s’ characteristics as a Business Centre
St. Julian’s Business Center, The Regus, Swieqi Junction and The Dragonara Business Centres can all be found in St. Julain’s.
St. Julian’s is Malta’s most prestigious business district. It is upmarket, glitzy and glamorous and right next to Sliema with easy access to all major highways and arteries. It sports designer shops, diamond dealers, 5-Star Hotels, casinos and the breathtakingly beautiful yacht basin of Portomaso. This is where the well-heeled come to be seen, shop and sip on lattes.
- MRIEHEL – A PRIME DESTINATION FOR MALTA BUSINESS, BIG OR SMALL
Mriehel is arguably at top the list for financial institutions’ business locations. It is home to the MFSA, Malta’s Financial Services Authority and Mriehel is relatively industrial, with a very low residential footprint. It is very central and borders the areas of Birkirkara and Qormi. Another number of key financial services providers are already headquartered in Mriehel, including The Bank of Valletta, HSBC Malta and four auditing giants amongst which one will find PriceWaterhouseCoopers, KPMG and Deloitte for example.
Geographically, Mriehel is just a fifteen-minute drive from Malta’s international airport with Valletta and the Sliema a respective 7km away and less than ten minutes’ travel by car. The area is also well-connected to Malta’s public transport network. It is for good reason that Malta’s well-established legal and audit firms have chosen this region to set up office: it is central and tranquil as a business environment.
- It is also here in Meriehel that one will find BOSI (Business Office Spaces International) offering commercial office spaces for rent:
- Should your business not require direct contact with clients, renting a serviced office space in an industrial centre such as the Business Office Services International Malta block located in Mriehel is an excellent choice. This block offers contemporary office spaces starting from as little as €650 per month, ideal for start-ups or the still-growing business.
- These offices are available for immediate occupancy, complemented by state-of-the-art meeting and conferencing services and all other office amenities. Frank Salt Real Estate is proud to be the exclusive agency for these prestigious offices.
- These new state-of-the-art office premises were launched in 2015 and provide a very flexible office rental solution. All are high quality, prestigious, ready-to-go offices and offer plenty of natural light, enjoying beautiful country views.
- Various office rental options are available: from conventional offices to private glass-partitioned, individual offices. General services include broadband internet access, personalised telephone answering, mail and courier, reception, 24-hour secure access, daily cleaning, heating and air conditioning, access to photocopy and scanning facilities, use of fully equipped kitchen, free beverages, organisation of board meetings and use of board room/meeting rooms with audio visual facilities. Private parking is also available.
- All office suites are beautifully presented and comprehensively equipped. Varying in size and available on ﬂexible terms the office spaces conﬁgurations will suit any business from start-up to SME and large multi-nationals looking at renting an office in Malta.
- Other on-demand packages offered to tenants of office spaces at BOSI Malta include more sophisticated infrastructure and IT support that can be tailor-made to a clients’ specific needs. This new exciting business centre joins a network of prestigious office spaces operated by Business Office Services (Luxembourg) and are located in several major centres internationally.
2. LAYOUT AND SIZE
Once again, the layout and size of your business premises will all depend on the type of business you are operating and also what impression you want to create. In the manufacturing sector no-one will bat an eyelid if your premises are in the outskirts in an industrial area and covered in dust. If you are for example in technology and infrastructure, financial services or i-Gaming, you need premises that are sleek, stylish and contemporary. Never forget that first impressions do count!
Open-plan offices are still very popular although social distancing rules apply nowadays along with good ventilation and contactless doors, elevators and more. When it comes to size, the average is to allow around the 10-15m2 mark per person for traditional office space. This will allow for some room to grow in the years to come and will also give you a good idea of total floor space you are looking at taking into account your number of employees.
You will also have to take into account additional individual office spaces such as boardrooms, meeting areas and informal lounges, kitchens, bathrooms, reception areas as this will affect the total rental. This is where shared office spaces come into their own right as all of the latter are shared by several companies located on the same floor or in the same building. Always make sure that you are happy with the condition of the offices prior to taking possession or signing the contract. If you plan to undertake your own renovations or upgrades once you have moved in, determine with your landlord/lessor whether this will be allowed, who will be paying for it and if you will be reimbursed if you move out one day.
2. COSTS & TAXES
In Malta, the rental price is calculated according to space acquired and this price will be reviewed annually. Hence, when renting offices in Malta, it is imperative to estimate the predicted rental expenditure for years in advance, rather than just taking into account the first year of business.
Some of the costs when renting commercial property will have to be paid before you take possession of the property. This will usually be the first month’s rental and of course a security deposit as agreed upon by you and the landlord and this will be held in an interest-bearing trust account until you vacate the property when the rental agreement comes to an end. The amount refunded to you will usually be the total plus interest accrued over the lease period, minus any damages or repair costs incurred by the landlord if caused by you during your rental period. It is important that these conditions are determined, agreed upon and finalised before you sign the lease as it is common practice that landlords keep the entire amount in Malta with no need to refund you.
If you are going to make any structural changes to the property, these need to be clarified and agreed upon prior to signing the lease and it also needs to be clarified who will be paying for it.
If you are taking over the rental of a going concern, there will be what is known as “key money”or a “key deposit” which covers any fittings and fixtures that you otherwise would have needed to operate which is already there and this can also include stock. All of these factors need to be clearly identified and agreed upon in the agreement.
As the business owner of a leased property, you will also be financially responsible for:
- Permits and licenses
- Fees regarding permits you need to obtain for signage and branding
- Any fees pertaining to MEPA authorisation you may need
- Various kinds of insurance
- Withholding Tax
In Malta the Withholding Tax Rate is calculated on 8% of the value of the property and this applies to all immovable property sales. Agency and broker’s fees will be payable whether the seller has made a profit or not. There are exceptions to paying this tax depending on whether the seller applied for the deduction and it is reviewed on a case-by-case basis. You may qualify in the following instances:
- Transferring/selling the property in less than 5 years from date of purchase the Withholding Tax may be reduced to 5% given that it is not part of a project or if an application pertaining to development permission was required.
- Transferring/selling the property within 3 years from the date of purchase the Withholding Tax can be reduced to 2% given that it is not part of a project or if you used the property as a sole ordinary residence, but this needs to be declared in the original deed.
- The above only applies if a seller does not own any other property when selling.
- Other exceptions apply to properties within UCA and if you can produce official MEPA certificates that restoration or rehabilitation works were completed, Withholding Tax of 5% will apply if the deduction has not been previously been applied for.
- Our best advice is to ask you notary regarding and deductions related to Withholding tax, as there are various categories and these are revised from time to time.
Malta’s crime rate is relatively low and it often makes the list as one of the safest places in the world to live. As with anywhere, it pays to opt for commercial premises that already have a measure of security in place such as CCTV or alarm systems. In Malta commercial premises that are located in business hubs, business parks and shopping centres with security protocols already in place are very popular. Should you buy or lease a property that does not have any security, it will be worth your while to invest part of the upgrading costs by installing security and in the case of a renting a property, discuss this with the owner. As the landlord, the owners may be willing to foot the bill or pay for part of it. Should you do this on your own without consulting the owner, it may be unlikely that you will be refunded.
The business of real estate is divided into residential sales, letting and commercial with combinations and overlapping in some instances of these divisions. It must be noted that commercial properties, without exception, all fall under a complicated classification system and this will have an impact on the type of property you can ultimately acquire that is best suited to your business activities.
There are many commercial classes or categories – each having a unique permit with distinct operating parameters to which the proprietor of such a property have to adhere to. This is governed by law and the specific rules and regulations for each property class need to be strictly observed in order to lawfully maintain one’s business license for operating from those premises.
Below you will find the breakdown of all the Commercial Classes as set out by MEPA, the Malta Environment & Planning Authority. Rules regarding aspects such as traffic congestion, health and safety, noise and air pollution are but a few of the determining factors that may apply to the property you wish to purchase or rent. We advise you to engage the services of a professional, registered architect who will investigate, verify and confirm that all the permits needed have already been approved or additionally advise you on which permits you still need to obtain.
At Frank Salt Commercial we have a vast database of different commercial properties available for purchase or rent. Additionally, we can also assist you through the compliance process, ensuring that your property of choice is fully approved for the type of business you want to operate from your chosen premises.
In all, there are 8 categories of properties, all organised by class. Each class contains a short description of that category and make sure you read through any of the amendments at the end of this breakdown, or those contained in the official MEPA documentation should it not appear in this writing.
Frank Salt Real Estate is a Maltese brand synonymous with real estate for more than 50 years. Founded in 1969 it has a solid reputation for its strong business ethics and quality of service with a well-respected Commercial Property Division located at Portomaso, St Julian’s.
All consultants come from a business background and the Commercial Property Division has also been awarded the title of ‘Best Commercial Property Real Estate Agency in Malta for 2019’ confirming its level of professionalism within the Commercial Property sector in Malta.
This division’s client base consists of both private and corporate clients, local and overseas, some of whom represent large blue-chip corporations, banks, embassies, international companies and investors.
The database of commercial property, which includes offices, retail, factories, warehouses, catering establishments, hotels and commercial sites, represents the largest selection of commercial property on the island. The team provides specialist advice on all aspects of acquisition and disposal of commercial property and its strength lies in its detailed knowledge of the local market and the specific requirements of those businesses.