Cybersecurity company Imperva recently decided to renovate its Israeli offices. The company operates out of two development centers in the country, with 500 employees based in 3,500 square meters in Tel Aviv and 4,000 square meters in Rehovot. Before embarking on the office remodeling, Imperva pondered merging the two offices into one large development center, but the Covid crisis changed their plans.
Imperva head of global facilities and workplace Israel & EMEA Eyal Bourshtein recalled, "We decided to do a massive renovation at both sites in order to provide a response to the hybrid work model that the company had adopted in the wake of Covid."
Imperva based its office redesign on creating ‘neighborhoods’ with glass partitions to adjust the work environment to small teams and capsules. The company also added maternity rooms, massage rooms, lockers and more.
Another company that has recently undertaken a major office renovation is cybersecurity firm Silverfort, which leases 850 square meters for its 80 employees in Tel Aviv’s H Tower.
Silverfort cofounder and CEO Hed Kovetz said, "We decided to invest in a renovation to benefit the employees who come to the office and also out of a belief that Covid will end and employees will return to offices. There is a shortage of high level office buildings in Tel Aviv and instead of moving to a place with more room but less attractive, we decided to produce more space with what we have because its also in a very good location."
Silverfort says that the renovation included a kitchen, additional meeting rooms, and small rooms designed for personal Zoom calls and conference calls. Kovetz explained, "We wanted to allow employees to make calls without the need for a lot of room as well as pleasant and fun rooms that would encourage staff to come to the office. We also provided employees with a budget to let them work from home. The building itself is new, so we mainly tried to produce the maximum from the existing office space. We invested many hundreds of thousands of shekels.
Tenants demands: Balcony gardens
Some of Israel’s older office buildings are also undergoing major renovations, so that they can compete with the Class A office buildings. Natam Real Estate Services VP Or Ben Zvi Klein said that many buildings in Herzliya and Ra’anana are undergoing such extensive renovations as well as office buildings in Tel Aviv and Ramat Gan.
Sela Real Estate said that in their older offices that have recently been vacated by tenants, the company implements a major renovation of public spaces before signing a new lease.
For example, in the Moshe Aviv building near the Ramat Gan Diamond Exchange, NIS 5 million was recently invested in renovating the lobby, which included new flooring, and upgrading doors, corridors and passages, and electronic systems. A similar sum was invested in the nearby Paz Building in Abba Hillel Street in renovating the lobby, public areas on each floor and the bathrooms. NIS 5 million was also invested in the Ashdar building in renovating the lobby and balconies. Some of the renovations there were undertaken because tenants wanted balcony gardens.
Sela Capital Real Estate CEO Gad Elicam explained, "After Covid, companies invested a great deal in the work environment for employees. The tenants have been investing in public spaces beyond the work stations, which have become well designed spaces, all done to make the employee feel at home."
"Employees won’t come if it’s not a prime location
In the income-producing real estate sector buildings are rated between new high quality Class A+ down to Class C for old office buildings. But for the companies leasing an office, location is the most decisive factor and not only the level of finishing in the building.
Bourshtein said, "If offices are not in a prime location, then it’s difficult to hire employees. We see this with the behavior of large companies that open extra branches and offices in outlying regions to help employees that live there. Locations play a key role in the attractiveness of offices."
Kovetz concurs. "The location of an office is very important. It’s important that there will be convenient access for employees but it is impossible to compromise on the quality of the building. In the competition for the best personnel, the appearance of offices is important."
Bourshtein agrees about the quality of the building. "I wouldn’t consider choosing a Class B office over Class A, even if it isn’t in an accessible area because the office would remain empty. Workers simply wouldn’t come to it. Renovation costs a lot of money and is meant to serve the company for many years. However, a company located in an unattractive will find it difficult to hire new employees and even to keep the employees that it already has."
Sela Capital Real Estate said, "As part of the leasing agreement signed with a new tenant, the company puts a budget at their disposal of between NIS 1,000 and NIS 1,500 per square meter, to adapt work spaces to the company’s needs. In some cases, tenants add their own budget which can reach hundreds of shekels per square meter, and sometimes double the budget that we have allocated. The price of leasing rises according to the renovation and it could be 50%-70% higher."
Outside of Tel Aviv: Renovation in the building Amdocs is leaving
Despite the major demand in Tel Aviv for office buildings, there are companies that bank on their employees not wanting to travel there. Amdocs is set to leave this year the building complex it occupies at the Ra’anana-Kfar Saba junction. The building’s owners REIT 1 and Saan Zahav decided to carry out a comprehensive interior renovation of the building with an investment of about NIS 100 million. The renovation began in the northern part of the building, which is not occupied by Amdocs and will continue in the southern part after the company leaves. "Central Tel Aviv is not always the preferred location," said Natalie Marshall, the representative of the building’s owner. "The renovation that we are doing is designed to give our tenants different renting options. Not all companies and tenants want to be in a Class A building, because there is a difference in price."
Published by Globes, Israel business news - en.globes.co.il - on February 9, 2022.
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