In April, Ari Real Estate (Arena) Investment (TASE: ARIN) announced that the seventh Israeli branch of Swedish furniture giant IKEA will be opened in Ashdod. The 25,000 square meter store will alongside a 22,000 square meter outlet of household design chain Redesign. A week later it was announced that their new neighbor will be the French supermarket chain Carrefour, which is being brought to Israel by Electra Consumer Products (TASE: ECP).
The exact location of the Carrefour store is unclear but there are reports that the 7,000 square meter supermarket will be built in the complex owned by the Ashdod Holding Co., in which Ari Real Estate has a 48% stake. This land is in a strategic location in the city, adjacent to the railway station, and opposite the Big Fashion strip mall, which covers 32,000 square meters.
Supermarket chain Yochananof (TASE: YHNF) has also announced that it is buying a 10 dunams (2.5 acres) lot in Ashdod's Park Lachish, not far from the port. The lot has permits for 24,000 square meters of commerce and 4,500 square meters of underground parking.
Another central location in the city is Star Center, a strip mall covering 50,000 square meters with 115 stores and parking for 1,400 cars. The mall has most of the country's best known retail chains and by the end of the year Greek chain Jumbo, the stock chain being brought to Israel by Harel Wizel's Fox-Wizel Group (TASE:FOX) will open an 8,000 square meter outlet there.
Why is Ashdod so attractive for the retail giants? The players in the retail sector give a range of answers from its central location in the south through to the large numbers of new immigrants arriving there from France. Perhaps surprisingly they do not mention Israel's largest cargo port as a factor. Nor does anybody mention the threat of missiles from Gaza.
A waiting list of tenants
"When you are talking about Ashdod's commercial potential, you are not only talking about the city's residents but also the surrounding towns," says Tamir Ben Shahar, CEO of economic consultants Czamanski & Ben Shahar Ltd. "In practice, one third of the money spent each month in commercial areas in Ashdod comes from outside of the city. It should be said that some of the commercial we are talking about will operate on Saturdays and the expectation is that people will come from Ashkelon, Yavne, and Kiryat Malachi."
Big Shopping Centers VP operations and marketing Eran Amatzia insists that shoppers are traveling to Ashdod from even further afield. "Not only residents of Ashdod and nearby have recently 'discovered' Big Fashion in the city. They are visiting it from throughout the country and it serves a population of over 500,000. We have recorded a significant jump in the past two years and the areas has become one of the five best shopping centers in the country, in terms of turnover per square meter and the satisfaction of the storeowners. We have started to build an extension to the shopping center and the demand is amazing. We have already marketed 100% and there is a waiting list, and unfortunately we will have to disappoint some tenants."
Tzachi Abu, the largest shareholder in Ari Real Estate says, "Negative migration from Ashdod over the past decade has been felt. Every development in Ashkelon is built for young people from Ashdod who move to live in real estate with cheaper prices. But still a former Ashdod resident who has moved to Ashkelon have the center of their lives in Ashdod. Their family is here and our centers provide service from Yavne to Beersheva.
"There is also a connection to the proximity of the railway station at the southern entrance to the city. This is a main transport route, and we are located really close to the railway station and actually we provide an opportunity for 300,000 people living in Ashdod, 200,000 that live in Ashkelon and another 200,000 living in the surrounding villages. The center near the railway station is going to be the largest shopping center in the country."
What attracts the retailers?
"Carrefour wants to enter the market because there are so many immigrants from France. They don't expect to get clientele from Ashkelon or anywhere else and chose this place because of the railway, its central location, and clientele that they are used to. Carrefour will also be the biggest single food chain on the northern side of the city.
"IKEA chose to come here because it is a strategic location between Yavne and Beersheva, in a geographical region that fits the planned layout of their branches. Between Rishon Lezion and Beersheva there is still no center that provides a solution for household design like Redesign Center. Our company owns two major leading shopping centers in the city and in the country. I don't know of any other open shopping centers that sit on land like this, with each one extending over 100 dunams (25 acres).
Growth in purchasing power
An analysis conducted by Ben Shahar found that, "Ashdod is in seventh place in Israel in terms of commercial square meters - with about 350,000 square meters gross and about 275,000 net.
"The main shopping centers are Star Center and Big Fashion. There are also three not so large malls in the city center - C Mall, The Kirya, and City. In the past there were several other centers that closed down including Melisron's Lev Ashdod, which became a surplus store mall and will soon be demolished and in its place a strip mall will be built with apartment towers above it.
"The city has about 230,000 residents with each household averaging 3.3 people. In terms of commercial space this is 5 square meters per household, which is close to Beersheva that has 6.6 square meters per household and Kfar Saba with 6 square meters and former shopping mall city Rishon Lezion with only 5.7 square meters per household. The average monthly salary of a salaried resident of Ashdod is NIS 9,000, close to the national average.
"The weaker focus of Rishon Lezion together with the significant growth in monthly purchasing power in Ashdod and Ashkelon and the outer ring of the Tel Aviv metropolitan area together with the transport chaos that reduces readiness to travel to the metropolitan centers, and the fact that in this region online and overseas purchases have not yet reached the levels of the center of the country, create conditions for an addition to shopping center supply."
As a further incentive, in January 2021, the Authority for Industrial and Economic Development awarded certain northern and southern areas of Ashdod with Development Zone A status.
"The significance of this is that companies that set up or expand enterprises will be eligible for substantial tax breaks including corporation tax of 7% and a better dividend tax of 20%," says Adv. Hadar Mauda of the S. Friedman law firm.
She adds, "Generally speaking part of the Law for the Encouragement of Capital Investment is to increase local GDP and create new jobs - mainly in peripheral regions."
Published by Globes, Israel business news - en.globes.co.il - on July 14, 2022.
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