The top tip of those betting on the Gibraltar property market in 2009 was to invest in commercial office space as quite simply, demand was outstripping supply so prices would have to increase. Below we investigate what’s happening to the supply and demand of office space and whether there is, indeed, an office crisis.
The supply of office space is coming from the last remaining units in recent developments (eg Ocean Village) and the refurbishment or change of use of existing older property stock. Scaffolding along Main Street, Irish Town and Engineer’s Lane identifies where more offices are being created. Other existing buildings outside of the Old Town also have the space and capability of adding further to the supply of office space. If banks regain the appetite for funding refurbishment, the built space is already out there.
However, construction hasn’t yet started on any of the new major office developments that have planning permission. This is most likely due to: the world economic crisis which still prevents the banks from lending on such projects; the insufficient demand for off-plan sales; and the high cost of construction given the strong (albeit weakening) euro. In reality, a combination of these three factors is delaying the projects. So, the chances of seeing significant areas of newly built modern office space before 2012 is nil.
In relative terms to the UK and Spain, demand for office space in Gibraltar is buoyant. In absolute terms, it is probably a steady trickle. Enquiries for space from outside of Gibraltar continue unabated, but probably not at the exponential rate at which some may have wished, or perhaps not the size of company that was envisaged.
New gaming companies are being attracted to Gibraltar, we know that, as are insurance and funds related businesses. These all need office space. However, there have been redundancies locally and expansion plans put on hold, so existing offices are being freed up and added to the supply.
There is now a noticeable change in the type of office in demand. Visit the new much improved offices at Quest Insurance, Jyske Bank and Gibtelecom for example. These are modern, open plan – with raised floors for ease of cabling – air-conditioned, light and have attractive entrances to give the correct impression to visiting clients. These are the types of offices in demand.
So although there may be 5,000 sq metres of office space currently available in Gibraltar – which is well over one year’s supply – the availability of quality office space with quality entrances is in fact dwindling as these are the types of offices being snapped up first.
Mike Nicholls is a Fellow of the Institute of Chartered Accountants and the founder of MN Associates Limited, a local company specialising in Gibraltar property, funding, relocation and financial management.