Rishon Lezion reinvents itself

Park Ha'Eleph Rishon Lezion credit: Eyal Izhar
Park Ha'Eleph Rishon Lezion credit: Eyal Izhar

Israel's fourth largest city is betting on new developments to bolster its status as the most important center south of Tel Aviv.

Rishon Lezion, Israel's fourth biggest city, seeks to become a mirror image of Herzliya, a southern satellite of Tel Aviv to rival northern satellite Herzliya. To achieve this Rishon Lezion is building three income-producing property parks to strengthen its regional status. The three parks are the Eleph district by Moshe Dayan Station, the Electra Medical Park, and the Agamim (Lakes) Park near the seafront in West Rishon Lezion, which will be a leisure and entertainment park.

Decades ago Rishon Lezion became known as the shopping malls city because a large number of mall were built in the city at the same time. Almost all of them have since closed down except for Kanion Hazahav. Once a magnet for commercial endeavors, the city's attractiveness has since declined and in recent years 200,000 square meters of commercial enterprises have opened in surrounding cities.

Between plans and reality

According to Rishon Lezion's financial reports in 2020, the city invested NIS 5,100 net in each resident, higher than the national average of just NIS 4,400, and 20th in the national rankings. The city has 11 square meters of income-producing real estate per residents, paying average annual municipal taxes of NIS 2,100 per resident - lower than the national average of 18 square meters but higher than the national average of NIs 1,200 per resident.

Rishon Lezion has a population of 260,000 in 90,000 households, according to the Central; Bureau of Statistics. The outline plan for the city sees a population of 330,000 in 2030 after the construction of 32,000 new homes.

The outline plan aims to turn the city into a main business center, implement urban renewal projects and strengthen the city center, along with the creation of office and commercial hubs in the western part of Rishon Lezion. The plan also seeks to enlarge the area of income-producing real estate in the city by more than 3 million square meters, including 500,000 square meters of commercial space.

In our opinion, this plan will not be implemented, since there is no correlation between the planning and and the economic potential. The socio-economic characteristics of Rishon Lezion are in the seventh average decile 7, and it lacks a distinct competitive advantage compared to rival cities.

The monopoly of Kanion Hazahav

In the residential sector, Over the past five years, construction of 1,200 new housing units has been completed on average. The city is developing eastwards onto land in the former Tzrifin army camp and westwards to the Elef complex.

Based on our calculations, by 2025 construction of 500,000 square meters of office space in the city would have been completed. In Electra Park, the Assuta Hospital, a sheltered housing facility and an orthopedic hospital will be built, on one million square meters; In Elef, business and financial offices will be established, including the Phoenix campus and Acro, to wom we are consultants, Israel Discount Bank's management offices, and others, with the total planned space of 1.7 million square meters of income-producing real estate; Agamim Park will have sports, recreation and leisure facilities, including hotels and attractions with offices covering 260,000 square meters.

Rishon Lezion currently has an estimated 525,000 square meters of commercial properties of which 230,000 square meters are in commercial centers. The average area per square meter per household is 5.6 square meters, a ratio that places the city in fifth place in the level of density of total commercial areas, and in fourth place in total areas available in shopping centers - making it a regional center. The main centers in its area are Cinema City, G centers and Kanion Hazahav.

Kanion Hazahav in the west of the city covers 40,000 square meters. A survey we conducted found that the mall is a regional monopoly for the residents of the city that is popular with young people. The survey also found that about 77% of residents visit the mall at least once a month, and the average frequency is 2.5 visits a month - that is, high. The survey also revealed that the reason customers prefer large centers is a diverse and wide mix of stores relatively close to home.

The neighbors are gaining strength

Monthly purchasing power in Rishon Lezion is estimated at approximately NIS 450 million. Of this, about NIS 225 million is spent on food and supermarket products, about NIS 50 million on catering products and cafes, and about NIS 180 million on "non-food" products.

In the "non-food" sub-market, the purchasing power entering the city is greater than the power leaving it by about NIS 100 million, but this ratio may change for the worse in the future. In the catering sub-market, entry versus leakage is balanced, with a third of the purchasing power in Rishon Lezion leaking to Tel Aviv, which is the "dining hall of Israel."

By 2027, monthly purchasing power in the city is expected to increase by roughly NIS 80 million. In practice, the increase in the supply of areas will be greater than the increase in demand. The new centers will have to be unique and good enough in order to continue to attract purchasing power from outside the city.

At the same time, large-scale construction (about 200,000 square meters) of new centers in cities competing with Rishon Lezion is being carried out today and will be undertaken in the future, where in some cases the products are identical to those found in the city.

This means that purchasing power coming from outside the city does not have other or sufficient options.But for them alternatives are being opened "nearer home." For example, in Ashdod over 50,000 square meters of new centers will be built, including another IKEA store (which will compete with the one in Ma'ayan Sorek in Rishon Lezion) and a large Carrefour branch. Bilu Center near Rehovot is being expanded by 20-25,000 square meters, and Big will open a new 25,000 square meter center in Ness Ziona. New shopping centers will also be built in Bat Yam, Beer Ya'akov and Holon.

In order to maintain its regional status, Rishon Lezion will be required to open very attractive new places and must also upgrade the city center, realize the winery project and conference center with commercial and leisure facilities.

The author is the CEO of economic consultants Czamanski & Ben Shahar Ltd.

Devora Ruckin participated in writing this article.

Published by Globes, Israel business news - en.globes.co.il - on December 8, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Park Ha'Eleph Rishon Lezion credit: Eyal Izhar
Park Ha'Eleph Rishon Lezion credit: Eyal Izhar
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