The impact of the increasing prevalence of remote work on commercial office space is leaving a mark on KA Holdings, which has been told by BOV that it will be terminating its lease in the company’s Mrieħel business centre, Centris Business Gateway (Centris I).

KA Finance plc, the finance vehicle for the Group, which is engaged in real estate development and rental, has informed the market that the loss of the lease, which includes office space on the third and fourth floors and 45 garage spaces, represents 16 per cent of KA Holdings’ total rental revenues.

Noting that the termination will take effect on 31st December 2023, the company said it is taking “immediate action and is confident that these areas will be re-occupied in the short term”.

BOV, Malta’s largest bank, took up a tenancy at the building, a stone’s throw away from its headquarters, in 2017. Since then, Centris I has housed the bank’s Risk Management Division, Compliance, Anti-Financial Crime and Debt Management Unit.

The new offices were inaugurated by then-Prime Minister Joseph Muscat, who resigned amidst major controversy in 2019, and by then-Parliamentary Secretary for Financial Services, Digital Economy and Innovation Silvio Schembri, who is now Minister for the Economy.

Attending the inauguration were also then-BOV Chairman Deo Scerri and then-BOV CEO Mario Mallia, both of whom left the bank in 2020. Mr Mallia passed away shortly thereafter.

The former Prime Minister said the centre is “proof of the resilience of the financial services industry in Malta, and of Bank of Valletta's strength.”

Despite the lofty intentions, the post-COVID-19 pandemic reality is one where workers spend far less time at the office, with employers often finding it difficult to lure them back.

A source familiar with the matter tells WhosWho.mt that the enduring popularity of work-from-home arrangements, over a year since the last restrictions meant to limit the spread of the virus were lifted, has resulted in less need for office space.

The teams hosted at Centris I will now be moving back the BOV headquarters, they confirmed. 

In its annual report, KA Finance plc’s Directors highlight as the principal risks to the company’s future performance “any increase in supply of and any decline in demand for commercial and residential property to be leased may put downward pressure on the leases which the Group will be able to achieve or make it challenging to even rent out the properties,” admitting that “this may have an adverse impact on the financial performance and condition of the Group”.

Despite the loss of an anchor tenant, KA has seen success in the nearby recently completed Centris II, where it reports a 98 per cent occupancy rate after the last tenants moved in on 1st June 2023.

KA Holdings was set up by Kurt Abela in 2012. Apart from Centris I and Centris II, it also holds and rents out other properties in Gżira and Swieqi, which were fully occupied throughout 2022.