Issue link: https://maltatoday.uberflip.com/i/1538131
11 maltatoday | SUNDAY • 3 AUGUST 2025 NEWS St Julian's dominates commercial real estate lending in Malta St Julian's, Birkirkara, and Sliema account for nearly a third of Malta's €1.3 billion in commercial real estate lending, according to the Central Bank of Malta's financial stability review MALTA'S commercial real estate (CRE) lending remains concentrated in a hand- ful of key localities, with St Julian's emerg- ing as the primary centre for such loans. St Julian's accounts for the largest share of outstanding CRE loans, just under €160 million, over 12% of total bank loans for commercial properties. This emerges from the Central Bank of Malta's Financial Stability Report 2024, which includes a chapter on Domestic Banks' Exposures to the Commercial Real Estate Market, authored by Ariana Barto- lo and Shaun Zafferese. More than half of the loans in St Julian's were for retail business properties—a broad category that includes hotels, res- taurants, and shopping malls—followed by mixed-use developments with both commercial and residential components. Following St Julian's, Birkirkara and Sliema also represent significant CRE lending hubs, each with loan values ex- ceeding €120 million. While most loans in Birkirkara were di- rected at office developments, Sliema had a larger share allocated to business and retail properties. Together, St Julian's, Birkirkara, and Sliema accounted for 32.9% of total out- standing CRE loans at the end of 2024 Sliema is followed by Valletta, which at- tracted over €80 million in loans, spread across retail business properties, mixed- use developments, and a smaller office segment. St Paul's Bay closely trails Val- letta, but in this locality, most loans were directed toward retail business properties reflecting the predominance of tourism in this locality. Other localities attracting more than €40 million in loans include Naxxar, Qormi, Mellieħa, and Gżira. San Gwann which has a larger office component, closely trailed Gzira at just under €40 million. Loans for industrial development pre- vailed in Gudja, Marsa and Birżebbuġa. Overall, retail business properties form the largest share of CRE loans, represent- ing just over one-third of total outstand- ing lending. These include properties such as hotels, restaurants, and shopping malls, which remain central to local com- mercial activity. Office properties consti- tute the next largest segment, followed by industrial properties, which account for around 11% of CRE loans and include fa- cilities used for production, distribution, and logistics. Mixed-use properties—combining commercial and residential uses—along with garages and parking facilities, make up a smaller portion of the portfolio. Oth- er types of commercial real estate loans, not specifically categorised, complete the overall distribution. According to the report, all outstanding CRE loans are collateralised, with the vast majority secured by the financed real es- tate itself. This high level of collateralisa- tion helps mitigate potential losses in the event of borrower default, as banks retain the ability to foreclose on and liquidate properties. From a financial stability perspective, domestic CRE lending remains relatively modest compared to the residential re- al estate market. However, it holds par- ticular significance among core domes- tic banks, where CRE loans represent a notable share of loan portfolios. Despite this, the average loan-to-value ratio re- mains contained, and only a limited share of CRE loans is currently impaired or in default. From COVID-19 to climate change The analysis also notes the impact of the COVID-19 pandemic, which led to a de- cline in demand across certain CRE seg- ments—especially office spaces and re- tail properties. Anecdotal evidence from banks cited possible oversupply in some property types and continued reduced demand for office space, reflecting broad- er shifts in work patterns. Additionally, evolving climate-related risks, such as rising temperatures and flood exposure, are gradually beginning to influence investment decisions and risk assessments in the real estate sector. The report suggests that risk assessments should incorporate data on building sus- tainability, especially for the largest ex- posures, to better evaluate potential cli- mate-related risks. This assessment is based on data collect- ed up to the end of 2024, with the credit value of identified CRE loans standing at approximately €1.3 billion—representing 13% of the total outstanding real estate loan value reported. JAMES DEBONO jdebono@mediatoday.com.mt Photo: James Bianchi/MaltaToday