Over 4,000 unused government properties, NAO finds in private lease survey

The Maltese government owns over 4,000 unutilised properties, yet many of its entities are still leasing some 260 properties from the private sector.

The findings form part of a preliminary review by the National Audit Office to evaluate the degree to which the government’s leasing of private property reflects value for money.

In total, this represents 213,112 sq.m of privately-leased real estate, at a value of €22 million a year, but in total valued at over €204 million for the total duration of the leases.

Additionally, a €41 million outlay has been spent by government by way of capital investment in these leased properties.

Around two-thirds of these properties are used for office space, but in 43% of cases, no formal needs assessment was carried prior to leasing a private property. The process regulating the procurement of government leasing of private property was only recently addressed in 2020 through new procurement rules to enhance the efficiency and transparency of leasing activities.

In general, government entities must first enquire about the availability of government-owned properties with both the Lands Authority and the Joint Office (JO) before starting a procurement process.

But several operational issues still prevent this apparently seamless process, from outdated digital information in the Land and Estate Management Information System (LEMIS), to a lack of standard operating procedures in managing these enquiries.

On the other hand, government entities are also looking for adequate, accessible and state of the art premises, which are not readily available in the government’s property portfolio, which apart from often being in a state of disrepair, tend to be in undesirable buildings and areas.

The survey results show that, in 2022, the average leasing cost per square metre (sq.m) was €118. However, the additional capital costs incurred by Governmental Entities to refurbish some of the leased properties, raises value for money concerns.

From 2018 onwards there was also a steady increase in the number of leased private properties: 76% of the 260 agreements were entered into between 2018 and 2022.

Governmental entities told the NAO they face insufficient office space and need good locations for their operational logistics and client interface. “On the other hand, the prevailing condition of many unutilised Government-owned property as well as the upgrading costs involved and the time required to refurbish unutilised properties, discourage and hinder governmental entities from transferring and operating from these unutilised properties, which are listed in property inventories maintained by the LA,” the NAO said.

This situation implies that government needs to strengthen its estate management arm to cater for demands driven by specific public bodies.

The NAO called for a centrally maintained database of all leases from the private sector involving governmental entities, new agreements, lease duration and annual leasing rate. This would facilitate comprehensive overviews of such activities, with real-time, centralised data that can be analysed.

In view of the increasing number of private sector leases, the NAO said government should create a central department or entity which manages these leases. “Centralising lease management ensures consistency and standardisation in lease agreements across various entities.”

It also called for studies and a cost-benefit analysis to determine the best possible cost-effective options for having additional space for government use, when required.