Living above the store

Azorims Beersheva project  / Imagin: PR

Having stores downstairs cuts the price of a home but the latest city center projects, especially in Tel Aviv, are creating a new trend.

When wandering in the streets of older Israeli cities in the course of shopping or doing errands, you sometimes wonder who lives above street level in the apartments over the stores. Even in residential areas in city centers, Israelis are inclined to live in buildings with small, well-kept gardens in the entrance, preferably not facing a main street, rather than in apartments in buildings with a small supermarket, barbershop, or greengrocer in the entrance.

As a result of this preference, buildings constructed in city suburbs starting in the 1990s almost completely lack the commercial facades typical of older streets. These neighborhoods feature identical buildings with balconies, shrubbery in front, underground parking, and a public garden in the center. Most of these buildings have no grocery stores, kiosks, laundries, or hairdressers. Most of the sounds heard there are of children shouting, but even a minor errand requires getting into a car and driving into the town center. Are all of these changes reflected in the value of these properties? "Globes" decided to find out.

Prices: Bargains for older properties

Buying a secondhand apartment in a building with a commercial façade can be a real estate opportunity. Realtors talks about large price differences between apartments in "ordinary" buildings and apartments above commercial facades.

A three-room apartment above a pub in the northern section of Herzl Street, a main traffic artery in Rehovot, was recently sold for NIS 1.4 million. A similar apartment on a nearby interior street was sold for NIS 1.58 million, 15% more. Keep in mind, however, that the commercial façade was not the sole factor affecting the price; the building's location on a noisy main street and the fact that the property under it was a pub also influenced the price.

Anglo Saxon Real Estate Tel Aviv CEO Kfir Zohar says, "Where there are a few isolated stores and 'clean' commercial space, such as a clothing store, there is no significant effect on apartment prices. When there is a commercial center containing a fish store or greengrocer, and noise, odors, dirt, and noisy traffic are involved, however, the situation is completely different, and prices are likely to be 10% lower than for apartments in a building with no commercial façade."

According to figures from appraiser Levy Yitzhak, the price differentials can be even greater. A four-room apartment in Neve Sharett in Tel Aviv on the first floor above stores was recently sold for NIS 2.11 million. Yitzhak says that the real value "without the nuisance below" is NIS 2.6 million. A four-room apartment on Habanim Street in Hod Hasharon above stores was sold for NIS 1.68 million, compared with a real value of NIS 1.95-2 million.

The Anglo-Saxon Real Estate franchise holder in the Krayot region north of Haifa, managing director Yuval Shmul, says, "An apartment above a commercial floor will be 20% cheaper than an apartment on the same scale with no commercial floor. For example, 120-square meter five-room apartments in a new building currently under construction on Goshen Street are being offered for sale for NIS 1.6 million, and it's very hard to sell them. A five-room apartment on Barak Street, a parallel street, is being sold for NIS 1.75 million far more quickly and easily, because it's quiet and less commercial. The distance between the two apartments, as a crow flies, is only ten meters."

The Keller Williams franchise holder for Beersheva, Shlomi Amar, says that a commercial façade has a significant effect on prices of as much as 15% in buildings in Beersheva. Four-room apartments in a 20 year-old building with a commercial façade in the Neve Zeev neighborhood are being sold for NIS 1 million or less, while prices for similar apartments in nearby rear buildings cost as much as NIS 1.1-1.15 million.

Oded Setti from RE/MAX More Modi'in gives a few more examples. The price of a four-room apartment on Habadolach Street in the Kaiser neighborhood averages NIS 2.15 million, but above stores, such an apartment costs NIS 1.9 million. In Givat C, there is a commercial center with a restaurant, a barbershop, and a center for children's hobbies. The price of the apartments very close to the center is 5-7% lower than the price of apartments further down the street. A six-room penthouse without a commercial façade will be sold for around NIS 4 million, while a similar apartment with a commercial façade will be sold for NIS 3.7 million.

This is not an opportunity in all cases, however. In general, it appears that as you get closer to the center and Tel Aviv, commercial facades become more acceptable to tenants.

In Rishon Lezion, "Globes" found apartments in buildings with commercial facades being sold for the same price or more as apartments in buildings without commercial facades. Sivan Cons, the Anglo Saxon franchise holder in Rishon Lezion, says that a three-room apartment with an elevator and parking at 82 Rothschild Street above a greengrocer and a clothing store was sold for NIS 1.61 million. A three-room apartment in a building at 2 Hasadeh Street, corner of Rothschild Street, with parking and an elevator, above a tree nursery and a hairdresser, was sold for NIS 1.5 million. She adds that these are the average prices for the area, or even a little higher, thanks to the addition of an elevator and parking.

New projects: The price is affected less

In Rishon Lezion's western neighborhoods, where building is more modern, a commercial façade also has no real effect on the price of an apartment. On Hahalmonit Street in the Kiryat Rishon neighborhood, a four-room apartment on the first floor with a balcony, parking, and an elevator just above a large branch of the Yenot Bitan supermarket chain was sold for NIS 1.8 million. For the sake of comparison, a similar four-room apartment in the same neighborhood, also with a sun balcony, an elevator, and parking, was sold for NIS 1.85 million, an inconsequential difference of less than 3%.

In Ra'anana, Keller Williams franchise holder Avi Salzman tells about a new project in the Neot Sadeh neighborhood, in which a commercial space is being built on the street level, and prices on the street are the same as those of apartments without a commercial floor.

There are even places where the prices of housing above commerce are higher. The Azorim Block project being constructed by Azorim opposite Ben Gurion University of the Negev in Beer Sheva has eight residential floors above a commercial floor, with 147 apartments in four buildings. Azorim head of marketing and sales Gil Gurevitz says that the price per square meter in this project is NIS 17,000, compared with an average of NIS 15,000 per square meter in the area. The buyers are not typical buyers; they are mainly over 50, doctors at Soroka Medical Center, or academic staff at the university. The company says that the prices per square meter in its Herzliya Hills project at the highest in Herzliya outside of Herzliya Pituah.

Prices depend on the building's location and how the commercial space is constructed

Zohar says, "The price of apartments in the Sheraton City Tower in the area of the Ramat Gan Diamond Exchange is lower than those in a tower without a commercial center below, because the human traffic is liable to affect the tenants' quality of life, interfere with the movement of vehicles entering and leaving the site, and cause problems with parking and dirt. At the same time, a commercial center will be considered an advantage for young people, so these properties are extremely attractive for investors."

"If we take the Noga site in Jaffa, where residences are part of a single unit with commerce, including cafes, bars, neighborhood grocery stores, and clothing stores, it is very easy to rent out apartments in the neighborhood to young people and move-up buyers with few children," Zohar adds. "In Kikar Hamedina, as you near the interior circle of the plaza and the line of stores, prices are higher, and the people living there are usually the apartment owners, not renters. The site is considered more prestigious, despite the presence of a greengrocer, cafes, etc."

More time on the shelf

In some places, the need to sell is longer. "Several years ago, I received an amazing luxurious penthouse with over 400 square meters in the city center," says a veteran real estate agent in a city in central Israel. "The problem is that it is located in a building with a commercial façade and an entrance to a passage, and the staircase in the building was not separated from the entrance to the stores. Anyone going there saw garbage first, and didn't want to go to the apartment. I went to the building 30 minutes early to clean the entrance, because people from the stores used to sit on the stairs in the entrance, eating, drinking, chewing sunflower seeds, and smoking. I was trembling with fear about what I would find when I came with customers.

"This was a serious problem. I even tried to talk with the building's committee of residents, which could have closed off the garbage area, so it would not be exposed to people arriving, at little cost. It took me two years to sell the apartment, and it was sold for 15% less than the price at it would have been sold, had it been located in the building next door." The penthouse was eventually bought by a young couple, "who agreed to close their eyes all the way to this amazing apartment."

Keller Williams Ness Ziona franchise holder Ofek Ben Eliyahu remembers an old apartment on Rothschild Street in the city, a street bustling with stores. The apartment needed major renovations.

He had trouble selling it for six months, even though it was correctly priced in accordance with three different appraisals. Ben Eliyahu says that in this case, also, salvation for the sellers came from a young couple, who fell in love with the building's location. "The convenience for young couples is that they have everything under their home. They don't need a car to get around, and can rely on public transportation, which is a huge advantage. One person's drawback is can really be an advantage for somebody else."

Buyers looking for convenience under their homes

Sharon Band, an urban planner and marketing manager and owner of the Bamida company, which engages in strategic planning for business, community, and tourism development, supports this idea. "In planning such buildings, it's possible to take into account that the apartments on the lower floors, which are closer to the commercial floor, are small and cheaper studio apartments designated for young people who are less sensitive to noise, and who are willing to live in a livelier area," she says. "Young people are much less sensitive to noise, and sometimes think that it's cooler to live above a neighborhood bar, restaurant, or café."

Anglo Saxon Real Estate Rehovot franchise holder Avi Pinhas says that someone interested in buying apartments in the northern part of the city for investment purposes is not worried about buying apartments located above cafes and pubs, because these apartments are in greater demand among students learning at the nearby Faculty of Agriculture and the Weizmann Institute of Science, and it is important to them to be near the entertainment centers.

Keller Williams Israel CEO and regional operating principal Amos Naim says, "In Tel Aviv, we see how the right retail business causes an increase in the real estate value. One example of this is the Basel site, which has created around it a neighborhood featuring strong local retailing. Young families and couples, and also tenants, are very interested in living close to sites and enjoying the cafes, delicatessens, and so forth. This matter of course contributes to the branding and high-end positioning of the commerce in the area. Since there are parking and transportation problems in the area, the existence of a high level of commerce nearby is a big advantage for the tenants. Young couples don't have to get their car out of the parking space they found, or think about how to find parking in the area when they get back, because everything is within walking distance.

"In this aspect, Tel Aviv is like Manhattan, where most of the residents use public transport to get around, and the existence of commerce is very important for buyers."

"Investors like buying apartments in the city center. They don't care whether or not there's a commercial façade," Cons says. "It's not a factor for them. Young couples like living in the center, because all of the pubs are open in the evening. People without a car like the center. Even students, who up until a few years ago chose to rent housing units in private homes in neighborhoods close to the College of Management Academic Studies, are now looking for subdivided apartment in the middle of Rothschild. The noise, dirt, odors, and crowding in the entertainment districts don't deter them. This location is hot enough, so there has never been a problem selling apartments there."

Mix: A café, but not a fast food joint

The mix of stores on the commercial floor will have a dramatic effect on the property's value. "One of the most frequent questions that we ask buyers concerns the mix," Gurevitz says. "As soon as the tenant sees that the developer is guarding his interests, it puts him at his ease."

Yitzhak mentions a building with six apartments on Uziel Street in Ramat Gan that had a bookstore under it for years. "When the bookstore owner died, the store was sold, and a shwarma and falafel stand opened up on the site. Odors of oil, dirt, and masses of people made all of the tenants leave, and the apartments on the first floor were sold at 50% of their value, with the purchaser being the owner of the stand. Owners of the apartments in the building sold or rented out their apartments at low prices," he says.

"Restaurants are an important anchor," Band says, "but it has to be light food. People don't like functional commerce as much - a grocery store for milk, maybe a hardware store or a hairdresser - they want all of them. There were once much clearer anchors, like a bank branch and a postal branch. Nowadays, a postal branch is still important, because people receive packages from online shopping, but bank branches are thinning out. Today, people want a café or a delicatessen, things linked to lifestyle.

"On the other hand, when you put a restaurant or a bar or café under a house, the neighbors living above say, 'Excuse me, I don't need people talking under my window now, or café owners playing music until 11 at night.' Someone planning commerce underneath residences has to be considerate of sensitivities in such aspects."

Azorim has devised a strategy in which they retain ownership of the commercial areas and rent them out to businesses, instead of selling them. This enables them to preserve the mix in the long term. The company has nine multiple-use sites, some of them with offices and commerce, and others only commerce. These sites will contain over 50,000 square meters of commercial space by 2025.

Next stage: Offices in addition to stores

Azorim is marketing several new multi-use projects with offices below, not just stores. One of Azorim's current prominent projects is Herzliya Hills - 600 housing units with an office building with 30,000 square meters of space.

Azorim asset manager Dan Mor says that the nearer that the buyers are to Tel Aviv, the greater their interest in multi-use projects, while this has not yet been discovered in the outlying areas. "This audience sees this as a great advantage, because it enables them to make better use of their time. You don't need your car to go shopping at the supermarket, go to a café, or get a haircut, and a large proportion of the tenants also work in the office building. Herzliya Hills is the project with the highest price per square meter in Herzliya, outside Herzliya Pituah," he says.

Published by Globes, Israel business news - - on March 4, 2020

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

Azorims Beersheva project  / Imagin: PR
Azorims Beersheva project / Imagin: PR
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