What We Think
October 27, 2020
Transforming the real estate sector
There is no doubt that the real estate and construction industry have been important contributors to growth over the past couple of years. Various projects have mushroomed over the island providing jobs for thousands of foreigners who migrated to Malta and in turn these all contributed to the national economic activity. This construction boom has been supported by laxer permit issuance, supportive tax measures and a demand that has been fueled part by increasing numbers of foreign workers and part by speculation.
Over the past years, as the amounts of tower cranes kept peppering the skyline, debate started to shift more towards the quality of growth, the safeguarding of the environment and the future of the market. As COVID continues to cause economic distress and to bring to the fore the debate on our collective future and especially the economic model, we need to collectively reflect on what future we envision for a number of sectors, including real estate and construction.
Dubbed as the great reset, it is time that a serious, non-partisan and national debate is held on the transformation of our industries. As a small island state, we have been focused on diversifying and attracting new economic sectors. However, rarely have we sat down to chart a way forward for the existing sectors in view of the various challenges that they face and will face in the near future. This exercise, dubbed industry transformation mapping, is something that the country needs to engage in to reassess, revalue and rethink the strategies for the future. This needs to be pursued for all traditional and existing sectors including manufacturing, tourism, construction and real estate amongst others.
The construction and real estate sector have been one of the most traditional industries in Malta. Our history as an island can be seen in our relationship with our stone right from the temples to modern day buildings. Construction and real estate have always been seen as a safe haven for investment purposes and over the years many people have invested their savings with the hope of multiplying them through real estate transactions. The growth of the recent years has definitely been supported by this mentality.
Moving forward, the industry requires an innate ability to transform itself in order to remain an economically important sector but to remain future-ready. The real estate industry is facing various challenges. New technologies have the potential to disrupt existing business models and traditional jobs. Consumers’ expectations are also rising – they want services which are more convenient, transparent and reliable. Also, environmental concerns are also requiring buildings and building methods to be more reflective of this and to embrace the broader environment.
A process needs to be initiated to transform the real estate industry so it can continue to grow and provide good jobs and economic value to the Maltese economy. The Government, together with stakeholders from across the entire real estate value chain, including property developers, contractors, building material suppliers, architects, planners, lawyers & notaries, real estate agencies, facility managers and technology firms need to embark on a consultative journey to ensure that this sector becomes truly future-ready. This process needs to have a number of pillars on which it will be based including on the ability of the sector to embrace innovation and leverage technology; to become greener as a sector and to strengthen the professionalism and the upskilling of the workforce.
The state of properties and buildings have shown the importance that these are well maintained to ensure optimal building performance and sustainability. Ease of maintenance will become increasingly important as our city ages, and as we continue to build new buildings and infrastructure. Current procurement practices focus more on reducing cost than enhancing service delivery. Therefore, an emphasis towards smart new buildings needs to be started which will allow facility management companies to innovate and invest in solutions that include real-time monitoring, predictive maintenance, and automation that improves a building’s operational efficiency. Here, agencies like Tech.MT and MCST should play a key role to ensure that research, development and technology innovations permeate all economic sectors.
Focus also needs to be given towards regeneration policies. A lot of abandoned and dilapidated buildings are eating away at the beauty of our towns and villages with the added possibility of creating ghetto communities. Government needs to actively engage in ensuring that such properties are restored and regenerated and fiscal incentives including taxing abandoned properties whilst giving tax credits or schemes to finance the restoration and regeneration should be considered. Government should consider embarking on a broad regionally focused regeneration effort as part of a broader economic recovery strategy in the post-COVID world.
We also need to leverage technology so that property transaction services can be faster and more efficient. Here, Government needs to look at digitising the property register to support this imitative which will enable property-related firms and professions to automate administrative processes such as time-consuming due diligence checks. The so-called blockchain island vision needs to start focusing on key areas in which registries and government-data are digitized and migrated on blockchains which will support other cross-national initiatives such as efficiency, productivity and due diligence. Focus needs to be on automating tasks such as property searches, contract templates and permit conditions so that the private sector can tap on the technology enablers and tools that should be provided by the Government to innovate and provide end-to-end and seamless services to consumers.
The construction and real-estate sector need to also be seen as important components and enablers of a greening strategy for the economy. The shift towards greening the economy is being given a bigger impetus due to COVID and the Government needs to ensure that this sector becomes a key enabler. The utilization of more environmentally friendly building products and methods needs to be a start. Integrating other concepts such as green roofs and walls will be another step in the right direction which will not ensure additional green lungs in villages centres but will also bring about tangible benefits to the tenants including a better insulated building.
Finally, industry transformation needs to be supported by a skilled and professional workforce. Here, the industry needs to work hand-in-hand with educational institutions to strengthen the continuing education and training framework to build up the talent pool across the industry from builders, to M&E technicians to facilities management personnel to property valuators to real estate agents. This needs to be hand-in-hand with an increased focus on enhancing health & safety across the industry; too many lives have been lost in the nae of construction.
Malta’s biggest challenge across all sectors is be future-ready. Complacency is not an option. Industries need to continuously transform themselves in other to respond to both the current but more importantly future challenges. COVID-19 has given us a unique opportunity to sit down and chart a long-run national vision based on a broad industry transformation exercise. The construction and real estate market are ripe for such transformation and could continue supporting both the economy and the environment if it had to embrace its greener side, become more technological in service-delivery and ensure the upskilling of the current and future workforce.
This article first appeared in MONEY.