Over the past year, the large chains have paid from $70 to $90 per sq.m. per month in the Aviv mall (all contracts are index-linked, for various periods). A shop selling imported chocolate that paid $125 per sq.m. per month holds the record. David Azrielli has let nearly all the space at the about to open Shalom mall. The final deals were concluded at high rents: the Stern jewelry chain leased 80 sq.m. for $90 per sq.m. per month, Neeman Porcelain leased 87 sq.m. for $75 per sq.m. per month. Other contracts were made at about $70 per sq.m. per month.
Business is good even at the old Dizengoff Centre mall. Two well known lawyers specializing in real estate bought from Yarden Investments, controlled by David Sofer, a 150 sq.m street level shop. They paid $1.1 million, which is a record price of $7,300 per sq.m. Why is it worth while for them? Because Polgat rents the shop at $55 per sq.m. per month, guaranteeing them a 9% yield on their investment. Dizengoff Centre is full, and the occasional spaces that became available this past year were let at $50 - $55 per sq.m. per month.
Another area where prices are holding up is the fashionable Sheinkin Street. Joe Pollak rented from Moshe Makov a 160 sq.m. restaurant at the corner of Sheinkin Street and Ahad Haam, and he will pay $41 per sq.m. per month.
On the other hand, in the more traditional shopping streets like Allenby, Ben-Yehuda, and Dizengoff, the picture is bleak, with falling demand and prices. One of the principal reasons is the shortage of parking space, which is particularly noticeable when compared to the abundant parking available at the malls. Recently, there have been almost no deals effected along Allenby Street, and the few that have been concluded were at rents of $20 - $25 per sq.m. per month.
Dizengoff has also fallen from its previous pinnacle, and there are dozens of unwanted, empty shops. A few years ago, every vacant sq.m. was rented at $50 - $65 per month. Now the shops are being offered at $40 - $45 per sq.m. per month, and there are no takers. A few shops in the area of Dizengoff Square have been rented at $30 per sq.m. per month. At Dizengoff’s northern end, and the marginal commercial areas of south Tel-Aviv, rents are even lower. For more than a year, a lawyer has been trying to sell a building in Herzl Street mainly comprising shops with upper galleries, but has been unable to find a buyer. The code is simple: if there is no parking, and if the place is not a fashionable mall, then the owners have a big problem. The value of their asset continues to erode, and, because the place stands empty for a long time, they also lose regular income.
Published by Israel's Business Arena March 26, 1998