Tel Aviv's Ramat HaHayal and Ra'anana have been worst hit by the fall in rental for office space in Israel since the start of the Covid-19 pandemic, according to a report by Natam on income producing property. The report, which compares income producing property rents in the first half of 2020, with the second half of the year, found wide gaps between different parts of the country, with relatively peripheral areas hardly affected.
Natam found that office rents per square meter in Ramat Hahayal and Ra'anana fell 8.8% in the second half of 2020 compared with the first half. Rents fell by 8.5% in the Ramat Diamond Exchange district and by 6.7% along Tel Aviv Yigal Alon Street in the heart of the city's office district. Rents fell 6% in Netanya-Poleg, 4.2% in City-Ramat Gan, 4% in Bnei Brak, 2.7% in Herzliya Pituah, 1% in Modi'in and near Ben Gurion airport, and just 0.8% in Kfar Saba and Hod Hasharon.
Natam VP real estate Or Ben Zvi Klein says that supply of income producing property is lower further away from the center, thus the lower fall in rents, and this is also the case in Jerusalem, Haifa and Beersheva.
"During coronavirus, Tel Aviv also lost its relative advantage of restaurants and cafes. They were closed and property owners became much more flexible on apartment rents, and we saw prices fall. In addition, the area continues to suffer from problems like jams and parking."
Ra'anana also suffered, Ben Zvi Klein adds because a lot of new office building came on to the market just before the Covid-19 crisis struck.
Despite this Tel Aviv remains the most expensive city for renting income yielding property with the financial district around Rothschild Boulevard and Ahad Ha'am Street the most expensive of all (NIS 122 per square meter, down 4% in the second half of the year), followed by Dizengoff, Arlozorov and Ibn Gbriol Streets (NIS 114 per square meter), and Menachem Begin-Yigal Alon Streets (NIS 111 per square meter).
Natam believes that income producing property prices in Tel Aviv will remain relatively low with occupancy influenced by hybrid practices which will mix office and remote working. Another factor keeping rents down is that 700,000 square meters more of office space is being built in Tel Aviv and will be completed by 2023.
Published by Globes, Israel business news - en.globes.co.il - on April 8, 2021
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