Israel is ranked only 26th for foreign investment in the country's income-producing real estate in the Europe Middle East Africa (EMEA) region, well behind the major European countries, according to Jones Lang LaSalle (JLL) international real estate advisors. JLL said that international investors were deterred from entering the Israeli income-producing market because of a lack of transparency.
According to the report, €2.554 billion was invested in Israeli income-producing real estate between 2017 and 2021, including €1.17 billion in retail, €840 million in office buildings, €211 million in industrial buildings and €90 million in income-producing residential buildings for long-term rental.
The UK and Germany attracted €330-350 billion in such investments last year and even small countries like Finland received €40 billion investments in income-producing property last year, 16 times the amount invested in Israel, even though Finland only has 60% of Israel's population.
JLL found a direct connect between the level of transparency in a country's income-producing real estate sector and the amount invested in it. 75% of international investments in the sector were in countries defined as 'very transparent,' and 'transparent.'
For example, cities like London, Paris, New York, Los Angeles, and Sydney, which are ranked as the highest in terms of transparency also attract the highest investments. The US, UK, France and Australia are also ranked very high in terms of transparency generally.
In contrast Israel is ranked 37th worldwide in terms of transparency and is in the category of countries defined as 'semi-transparent.' JLL speaks positively about Israel's legal and regulatory system, procedures for completing real estate deals, and the corporate governance of publicly-traded real estate companies. But what lets Israel down is sustainability and environment, basic market information, and the absence of income-producing property indices.
"There is no information on the income producing real estate market"
JLL Israel country manager Ziv Shor told "Globes," that the company's global transparency ranking was conducted through surveys with 210 questions about transparency and sustainability. "Sustainability is today considered a very important matter. Is there regulation on everything related to the energy in a project, for example? Is there a report about carbon emissions from buildings? To what extent does the building comply with LEED green standards (the US standard for green buildings)? How much concern is there for the workers' health and how efficient is the project management? All these are becoming more important issues worldwide."
What else is weak about Israel's income-producing real estate market?
"There is insufficient information about the income-producing real estate market and no measurements of performance. There are no indices for income producing real estate and it is even difficult to understand how many building starts there are of income-producing real estate because the Central Bureau of Statistics does not distinguish between office and commercial space. It is also difficult to know the level of returns on real estate deals in Israel because there is no clear measurement of the matter. When I manage a deal abroad, I can tell the client what the expected returns are on the asset. In Israel there is nothing like that."
Published by Globes, Israel business news - en.globes.co.il - on February 9, 2022.
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