Less than a month before the war, “Globes” reported a significant deal in which Amnon Shashua’s AI21 Labs leased 7,000 square meters of office space in Tel Aviv’s Da Vinci project for NIS 15 million per year. It will be interesting to see when the next major office space deal is signed in Tel Aviv following the impact of the Israel-Hamas war. Sources in the income-producing property sector in Israel have noted some interest in the sector over the past few weeks, although mainly for smaller deals involving hundreds of square meters each.
According to reports, Azrieli Group, one of the largest companies in the sector, has not seen any change in rents despite the war. The company remains optimistic but acknowledges the uncertainty surrounding the war’s duration and its potential impact on business activities in Israel.
Amot Investments, another major player in the income-producing property sector, has also expressed concerns about the war’s continuation and its potential effects on the economy and the company’s tenants. The company’s management estimates that if the war remains focused on the southern front and lasts two to three months, the impact on the company’s business will be minimal. However, a prolonged or wider conflict could lead to significant damage to the economy and changes in economic parameters.
Even before the war, there was already an oversupply of office space in Israel. Construction of 3.56 million square meters of office space began between 2020 and 2022. Real estate experts have expressed concerns about the occupancy of these areas, particularly in the central region where there are numerous ongoing projects.
Despite the challenges posed by the war, there has been a renewed interest in office rentals. Real estate professionals have observed an increase in inquiries and tours of office spaces, particularly for larger spaces ranging from 10,000 to 15,000 square meters. Additionally, there is still a market for deals and factories in the southern region.
Property owners have not reduced rents despite the current situation. Developers like Miki Naimi remain optimistic and continue to progress with their projects. Naimi Park, a large office park near the Messubim Interchange, is still being developed, and negotiations with three companies to occupy the space are underway.
Overall, while the war has brought uncertainty to the income-producing property sector in Israel, there are signs of resilience and continued interest in office spaces. The long-term impact will depend on the duration and intensity of the conflict.
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