Covid-19 hastens decline of Israel's main street stores

Stores for rent  / Photo: Guy Nardi

Even before the Covid-19 crisis stores were struggling to compete with malls and online sales. "Globes" looks at three Israeli cities.

Long before the Covid-19 pandemic reared its ugly head, the stores in Israel's main streets were losing the battle against air-conditioned shopping malls and the more fashionable power centers. Municipalities have been forlornly trying to revive the fortunes of their main shopping streets, for the most part without any great success. Then the coronavirus crisis hit and caused new hardships for storeowners.

Economic consultant Tamir Ben-Shahar said, "The coronavirus created an ironic situation. We know that in the shopping malls sales are only rising. But during the coronavirus pandemic we see people preferring to go to power centers and neighborhood commercial centers where there is a rise in sales."

He added, "You would have expected that it would also benefit stores in main streets but that is not happening because the streets are not attractive."

In part, he explains, this is because of the type of stores found in the main city streets. "The mix of stores is from the middle of the 20th century and not the 21st century." He is critical of the municipalities that have not taken responsibility and created attractive and safe public spaces.

City planner Sharon Band of Bemida Business and Community Strategic Development sees the municipalities beginning to rise to the challenge and working to strengthen commerce along their main streets. "I assume that what we will see after the coronavirus pandemic is local authorities beginning to invest much more in these spaces. It is not just a matter of repaving the sidewalks or lighting. There is a psychology to city streets and you must treat the state of mind of the public to attract it back. Coronavirus has strengthened the understanding that we need active commercial spaces within cities that are not shopping malls."

So "Globes" went out to take a look at three main streets in Israeli cities - Ramat Gan, Ramat Hasharon and Petah Tikva. In each place there was a similar picture. About 10%-15% of stores had closed down and the forecast is that these numbers will continue to grow as the Covid-19 second wave continues. And all this is happening even though rents are plunging. Some sources say that rents are down 50% along Ramat Gan's Bialik Street since the virus started spreading. In Petah Tikvah's Histadrut Street there is a similar trend while in Ramat Hasharon's Sokolov Street there is a modest 15% fall in rents over the past few months. Some sources believe that rents will only continue to fall.

Bialik Street, Ramat Gan

There is a big sign hanging up on the La Belle fashion store, "Long-established store is closing because of the virus - closing down sale." In the doorway we come across Miron and Dalia Livovitz who recount with deep regret that in two weeks time that will shut up shop after 32 years. Dalia said, "Because of the situation we decided that it was time to close down. Before the coronavirus business was slow but you always live in hope because over the years there were always times like that. But the coronavirus put the final nail in the coffin. We realized that there would be at least two very difficult years ahead in terms of the business. We are built mainly around higher fashion and importing from the biggest fashion houses in Barcelona. We've now sent back everything that we had bought. Over the years we always wanted to buy the shop as a property but the landlord did not agree. Now it's for the best."

Bialik Street is Ramat Gan's main street including City Hall and all the city's main institutions. This is considered one of the busiest streets in the entire Greater Tel Aviv region but despite the foot traffic, the 200 stores in the street are struggling to survive and many businesses have gone under. There are currently at least 30 stores that are closed with 'for rent' signs in the windows and other stores are advertising 'closing down sales.'

Yaron Hoze manages the "Roman Fashion" men's clothing store. It is a family business operating for more than 60 years but he is no longer optimistic. He says, "Generally speaking the street has completely changed also due to the change in retail fashion in Israel and worldwide. You can feel businesses are fleeing the street. Recently there have been attempts to fill the real estate vacuum among the streets stores with eateries. What coronavirus has done is to give a very strong and major push to those who were anyway teetering on the edge. I can't see any way of surviving if I have to pay the rent."

Real estate agent Yoel Bergerson from Anglo-Saxon, whose offices are in the street, says that stores started closing down before the Covid-19 crisis hit but the trend is now strengthening. If before the coronavirus stores could be leased for NIS 300 per square meter, the price is now halved to NIS 150. The municipality is trying to help by widening the sidewalks at the expense of parking.

Hahistadrut Street, Petah Tikva

We pay rent every month but don't see buyers

Hahistadrut Street is located in the heart of Petah Tikva's grimy, neglected city center. The street is relatively narrow with run-down residential buildings on each side, mainly built in the 1960s, with stores at ground level. There are few trees to provide shade and soften the concrete exteriors and there are hairdressers, women's clothing stores and a few eateries. A Super-Pharm outlet at the top of the street is about the only retail chain with a presence here. There are 110 stores with 10% of them closed down.

Daniel Eliayev from the Liveline hairdressers sounds dispirited. The customers, he says, even the regular ones, simply aren't coming. "There is about a 50% fall in the number of customers since they began talking on television about the second wave of the coronavirus. The whole time we only have cancellations."

Barak Segal from the Israelbody food additives store has also seen a fall in trade. "The amount of foot traffic outside is much thinner than it used to be. In my opinion, the blow dealt by the coronavirus will be fatal. I take my hat off to anybody who can successfully survive this period."

In another part of the street, we meet M who is sitting in her women's fashion store. She claims that she has the only store in the street selling clothes for all women and not just religious women. She smiles politely but sounds pessimistic. "Just recently one of the strongest fashion stores in the street closed down. Tzvia's store also closed down. I speak with all the storeowners here and it's not going well for any of them. On the one hand we have to pay rent while nobody is coming into the store."

Local real estate agent Yaakov Isaac is a good source of information about all the stores with for rent signs up. He says that today you can rent a standard store for NIS 3,500 compared with NIS 5,000 at the start of 2020. "Hahistadrut Street is close to the center and known in Petah Tikva for its boutique fashion stores. The fall in demand for city center stores is something that happened before, and its due to the proliferation of shopping malls and online commerce but Covid-19 has exacerbated the situation."

Anglo-Saxon real estate agent Yaakov Borovsky echoes these sentiments. "What is happening is that there was already a certain decline before the coronavirus. But Covid-19 has dealt a serious blow. A standard store that could be rented for NIS 6,000 before the virus now costs NIS 3,500. A store that could be bought for NIS 1 million now costs NIS 800,000.

Sokolov Street, Ramat Hasharon

There will be a new wave of stores closing down soon

For many years Sokolov Street was the most important thoroughfare in Ramat Hasharon. This was once the main highway between Tel Aviv and Herzliya although today people are more likely to take the Ayalon Highway or coastal highway. Back then there were no shopping malls in Herzliya, Ra'anana and Kfar Saba and the stores in the street flourished. Today the situation is completely different. The street is neglected and includes a diverse mix of stores. Alongside traditional grocers, greengrocers and hairdressers there are cigar, wine and luxury kitchen stores. Out of 250 stores along the road there are 20 that have closed down.

"If in the past people demanded compensation to let someone else take over their store, today every few meters you can see an available store," says Marcello Altuv, the owner of the Pardo ice cream store at 86 Sokolov. He claims sales are down 30% compared with last summer. One reason is the decline in passersby but also he supplies products to nearby restaurants and cafes and demand is down there too. "We've been standing here and talking for seven minutes and you hardly see anybody in the street," he points out to demonstrate how dire the situation has become.

The situation in pet products store Animal Outlet best reflects the hardships faced by the street's storeowners. Until March, the store's owner Eitan Katri wasn't even in the pet products business. He sold cruise vacations through his company "Cruise Outlet." He recounts "From March when the coronavirus cruise ship was in the headlines, we were among the first to be hit even before they closed the borders. By Passover we knew there was nothing to do."

I looked out of the window of my office and I saw no less than three stores opposite close down. So I decided to rent one of the stores and downsize from 90 square meters to 50 square meters and I pay NIS 6,000 less per month. With the area we do two things. There are pet products at the front and the cruise company at the back."

The large number of stores to let naturally influences prices. Moti Rabinovitz from the RM Real Estate Agency explains that rents were down 50% even before the coronavirus pandemic struck and he believes they will now continue falling. "The coronavirus has pushed down rents another 15%. The rent of a 30 square meter shop was NIS 4,000 before and now it is NIS 3,500. For larger stores the impact is even greater. A 50 square meter store that rented for NIS 8,000 per month before is now NIS 6,000."

He expects that many more stores in the street will soon close. "10% of the stores are already on the market to be rented out and I believe that within another month 10% more will be offered, and if 1% of those are leased it will be a miracle."

Published by Globes, Israel business news - en.globes.co.il - on July 23, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Stores for rent  / Photo: Guy Nardi
Stores for rent / Photo: Guy Nardi
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