After years of focusing on shopping malls and offices, incoming producing real estate giants Azrieli Group (TASE: AZRG) and Melisron (TASE: MLSR) have diversified in recent years into the residential market. Azrieli acquired ZMH Hammerman and Melisron merged with development company Aviv. These major acquisitions illustrate the shift, which stems from the erosion of yields in offices and commerce and the search for new growth engines, partly due to restrictions by the Israel Competition Authority. Now, with the publication of the two companies financial results, it is possible to see what the new activity has contributed.
The Gwyneth Paltrow effect
Melisron acquired control of Aviv Development in 2024 at a company valuation of about NIS 1.2 billion. Despite an initial slowdown in the market, in the first half of 2026 the company sold 166 apartments - almost three times the corresponding period in 2025. The bulk of the jump came from the "Aviv in the Sky" project in Herzliya, which was marketed in a campaign starring Gwyneth Paltrow. The campaign resulted in 56 transactions from May to the publication of the results, and another 55 apartments were sold in July.
Aviv Melisron's project backlog grew by 36% year-on-year to 13,300 apartments. According to Bank Hapoalim's analysis, the high-certainty projects are expected to produce revenue of about NIS 15 billion and operating profit of about NIS 2.4 billion. At the same time, revenue not yet recognized rose 24% to NIS 1.35 billion, with gross profit of NIS 270 million. The developers explained, "Sales preceded construction and some of the apartments were sold even though construction had not yet begun."
The number of apartments under construction currently stands at about 550 in four projects, and the company plans to increase it to 2,300 by the end of 2026 and then to 4,000, in eight additional projects. However, the developers note that Melisron's challenge is shifting from marketing to construction capacity, stressing, "A substantial part of projected growth depends on completing projects and occupying them on time."
At the same time, in other activities, Melisron showed a 5% increase in NOI to NIS 412 million. However, net profit decreased by 33% to NIS 289 million, mainly due to a decrease in operating profits compared with the corresponding quarter.
Azrieli’s growth
Azrieli entered the residential real estate sector when it acquired 67% of ZMH Hammerman in 2025 for NIS 635 million. In the first half of 2026, the activity produced revenue of NIS 249 million and profit of NIS 38 million. Today, the group's residential assets are worth about NIS 2.35 billion, and include more than 5,000 housing units in 27 projects, alongside land reserves and urban renewal projects.
In the first half of 2026, ZMH Hammerman sold 127 apartments (54 in Azrieli's share) for NIS 254.9 million - a jump compared to only 52 apartments in the corresponding period. The average price was NIS 2 million per apartment. The momentum continued with 21 apartments sold for NIS 63.3 million from July until the publication of the report, at an average price of NIS 3 million per apartment.
The surge in apartment sales
At the end of the second quarter, Azrieli recorded a slight increase in NOI to NIS 651 million and in FFO to NIS 426 million. On the other hand, net profit fell from NIS 320 million to NIS 155 million, mainly due to a fall in real estate revaluation profits and an increase in expenses. However, ZMH Hammerman contributed about NIS 30 million to the group's gross profit in the half, helping to mitigate the erosion.
"As in the rest of the world"
"Income-producing real estate companies must look for new growth engines beyond commerce, offices and logistics, where yields are beginning to erode," Avison Young Israel CEO Guy Amosi tells "Globes." "Beyond the immediate options like data centers, residential is an area that most companies have avoided in the past, and in recent years they have been making moves to enter it, whether by establishing an activity or acquiring an activity."
According to Amosi, the move is in line with what is happening in the world. "The trend of shrinking office space began with Covid worldwide and has not fully recovered. Israel is a somewhat unusual market, and the war of the last three years has created uncertainty and a halt in building starts, but we will see this trend expand in the near future. In addition, mixed-use is a growing trend, and there is a lot of logic in combining residential and office space in the same developments."
However, Amosi believes that it is still too early to know whether the entry of the income-producing real estate giants will prove to be profitable for them. "Today we are only seeing the beginning of activity. Due to the complex geopolitical situation, it is difficult to draw conclusions, and the feasibility of the move will only be determined in the coming years."
Published by Globes, Israel business news - en.globes.co.il - on August 20, 2026.
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