Maalot: Tel Aviv office rent rose 10% in 2005 to $12.30 per sqm

Every day, I read the Israeli press in English: The Jerusalem Post, Ha'aretzdaily and Ynetnews (Yediot Achronot). Globes is Israel's main business publication. In Israel, I knew a couple of people who worked for their English language website.

When I lived in Israel and was looking for jobs I looked into the real estate sector and what I found was that there was no established real estate development industry like in the US. Companies built buildings and brokers sold the space in it. If they needed financing maybe they went to one of the three largest banks or used their own funds. In the case of large housing developments the government was probably involved, especially in the earlier years of the state's existence. Now with the increasing liberalization of the economy more and more financial instruments are emerging in Israel. It's a great thing to see. The past couple of years has seen the establishment of what as far as I know is Israel's first REIT. The commercial real estate industry appears to finally be starting to mature.
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Maalot: Tel Aviv office rent rose 10% in 2005 to $12.30 per sqm

The occupancy rate rose 82% in Tel Aviv and 88% in Herzliya Pituah. The average office rent reached $12.60 in Herzliya, $11.30 in Petah Tikva, and $10.30 in Haifa.

Guy Yamin 19 Mar 06 12:25


A survey by Maalot the Israeli Rating Company on Israel’s office space market has found substantial improvement over the past two years, including for income-producing properties. This improvement has been driven by a business recovery, including in high tech, a drop in the interest rate last year, higher proceeds by shopping centers, and higher occupancy rates for office and high-tech space in Tel Aviv and its environs.
Maalot believes that the opportunities for establishing real estate investment trusts (REITs) since January 2006 is selectively boosting property values, especially in demand areas in central Israel, as well as properties leased to the government and tier-one tenants.

Maalot says that, in view of these factors, as well as the plunge in building starts and completions, the positive trend in the income-producing real estate market would probably continue in the near future, especially in demand areas in central Israel. Factors behind this trend are a reduction in available office space, the improved security situation, and Israel’s emergence from recession.

Maalot stresses that there is a wide rental differential between isolated office buildings and those located in high-tech parks, with rents in the latter 10-20% higher than rents for isolated office buildings.

An analysis by Maalot found that income-producing building starts fell 36.5% in January-February 2006, compared with the corresponding period of 2005. Despite this, Maalot believes the office space market improved substantially during 2005, after a four-year slump. Both occupancy rates and rent rose by about 10% last year.

The survey found that the average office space rent in Tel Aviv was $12.30 per sq.m. per month in 2005 and that the occupancy rate rose from 73% in 2004 to 82% in 2005. The average office space rent in Petah Tikva rose 12% in 2005 to $11.30. The average office space rent in Herzliya Pituah rose 13.5% in 2005 to $12.60 per sq.m. per month, and the occupancy rate rose from 77% in 2004 to 88% in 2005. The average office space rent in Rehovot was $9.70 per sq.m. per month in 2005, and the average in Haifa was $10.30.

Published by Globes [online], Israel business news - www.globes.co.il - on March 19, 2006

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