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Israel Real Estate Market View

Stav Cohen • 4/20/2021
A regular update on the commercial real estate market in Israel.

Another step towards the return to normality in Israel; as of 18 April 2021, people are no longer obliged to wear a mask in open areas. Masks are still mandatory in closed venues but permission not to wear a mask on the streets feels like major progress in people's positive feeling of returning to normality. 

25 March

Israel is on the map as its high vaccine rate results in an almost full return to normality. With nearly 60% of its 9-million-person population vaccinated, 4.5 million Israelis are fully vaccinated with both vaccines. In total, 5.2 million Israelis have received at least the first dose of the vaccine. This is a vaccination rate of more than 82% of those who can be vaccinated.  

In accordance with the above, all cafes, restaurants, shopping centres, bars, clubs, and events are now open. Limitations are being instilled either through restriction of the number of patrons allowed in one place or with the strict allowance of entry to those with ‘green passports’ - evidence of being vaccinated.

Entry to the country continues to be limited to Israeli citizens only. As the skies were closed for most of the population between January and March, Ben Gurion airport has reopened its doors.

We are not yet sure of the return to offices or the occupancy rate, as each company has its own set of ‘returning to office’ rules, but we can say those who were vaccinated are returning to the office more and more. 

It’s interesting to observe the strong desire for physical retail, despite all the online possibilities. The desire to return to spending habits like ‘shopping and lunch’ is something far beyond just purchasing or eating out - it is part of our lifestyle.  

Since the restrictions have been lifted, there has been a gradual and consistent improvement in the volume of credit card use. In the field of clothing and footwear, the volume of credit card purchases in the past week are more than 20% higher than the daily average before the Coronavirus period (in 2019). In other areas such as hotels and restaurants, credit card use has risen by tens of percent's in recent weeks, despite not having returned to a volume of purchases like the pre-crisis period. 

Food and shopping have once more shown their interdependence and synergies. Retail real estate revealed its market value as soon as doors opened again.  

Now it is much more obvious what clients really want. Picking up on the post-pandemic shopping experience can only improve customers' satisfaction and shopping malls’ overall mix and performance in the future. 

10 March

According to the latest publication by Bloomberg, which has built a database to document the extent of vaccination operations worldwide, Israel is expected to reach a vaccination rate of 75%. This will allow a full return to routine in just 2 months, while the US, for example, is forecast to return in 1 year and rest of the world in 7 years. 

As of 22 February 2021, Israel ranks first in immunisation rate per capita with 3 million receiving the second dose vaccine and 4.3 receiving after the first dose. With various publications on the effectiveness of vaccines in preventing the disease after receiving the second dose of about 98% and in preventing disease - of over 95%, the Government creates an optimistic picture.  

As of Sunday, 21 February 2021, the Israeli Government announced a gradual release from the past month’s lockdown. The Government has rated various cities using the traffic light method, with green, yellow, orange and red cities defined in colour according to the morbidity and immunisation rate in the city.  

  • Opening of business activities and return to offices - fully allowed with adherence to the rules of keeping distance and wearing masks. In practice, only a gradual return, with each company deciding the scope of return for itself. 
  • Schools and educational institutions have resumed operation almost fully in green and yellow cities and in part in orange and red cities. The same goes for organised social activities such as youth movements etc.
  • Retail - opened both on street level and in malls with the limitation of number of visitors according to the size of the store. This is being accompanied by increased enforcement of local authorities. The sale of food and eating in these places is still prohibited.
  • ‘Touristic Free zones’ such as the Dead Sea, will allow entry for those recovered and those vaccinated if they present appropriate vaccine certificates or certificates from preceding negative Corona tests.  

Another measure the Israeli Government is taking as part of the ‘Re-Opening Of The Market Strategy’ is giving a ‘Green Passport’ in addition to a vaccine certificate, to all of those vaccinated with the 2nd dose, which removes many restrictions for vaccinators such as the obligation to insulate, alongside providing benefits such as entry to gyms, hotels, cultural and sports events, and more.  

A limited night curfew took place this weekend, between 25 February - 28 February due to the Purim holiday. Besides that, it seems that the rapid rate of immunisation among the population and the high effectiveness of vaccines, will bring more and more companies back to their offices. At the same time, it should be noted that in recent days there has been an upward trend in the level of infection (R) - despite a strict policy of ‘closed skies’, taking place until further notice. This means no entries and exist of the country almost hermetically, except limited approvals of a special committee giving very few authorisations. The limit on the number of entrants to Israel is no more than 2,000 per day and most passengers entering Israel are doing so through special ‘rescue flights’ approved by the Government.  

The second phase of the opening of the economy, which was on 7 March 2021, included the expansion of sectors that have already opened, as well as the opening of restaurants, cafes, bars, hotel dining rooms, event avenues and cultural events. 


14 January

Israel was under lockdown from 25 December, whereby offices could be occupied by up to 50% of employees, restaurants could open for takeaway and educational bodies operated as usual. 

However, since 8 January lockdown has become stricter with the closure of all retail, shopping centres, educational centres - school and kindergartens. Restaurants may only do deliveries and offices are closed, except for essential bodies such as Government, construction sites, medical etc. 

This current lockdown is until 22 January but may be extended for another 2 weeks. In the background however, business is happening as usual remotely and there is no ‘hold back’ on transactions. Israel is leading in the numbers of vaccines to the population so despite lockdown, the vibe is highly optimistic. 


30 September

As of 24 September, the Israeli Government made an announcement on additional market closures:

  1. Medium Closure started 18 September
  2. Total Closure as of 25 September until 11 October with an extension option
  3. Number of daily infections arrived at a peak of 7,000 people
  4. Closure measures:
  • All workplaces, except for approved essential workplaces that will operate under regulations;
  • Closing all restaurants, bars, shopping centres and malls, cultural activities, and markets;
  • Essential food and pharma shops will be allowed to continue operating;
  • Limit the distance from home to 1km, except for reasons that will be approved;
  • Gatherings of up to 20 people and within a radius of up to 1 km from home. (Regarding demonstrations - the decision is subject to an amendment of legislation in the Knesset);
  • The synagogues will be closed during the closure period, except for prayers on Yom Kippur in accordance with the approved outline;
  • Public transportation will operate on a limited basis;
  • Aviation - A decision will be submitted for approval on 24 September and
  • Closure of all sports except international games. 


16 September

The morbidity situation in Israel does not look good; the number of new daily patients exceeded 3,000 per day and now there is a sign of another closure for a period of between two weeks to a month, to be finally decided on Sunday 13 September 2020.

More and more companies are working in a hybrid format of combined work of a few days in ‘capsules’ from offices and a few days from home. Retail, shopping centres and restaurants are currently working as usual. The expected closure may change the overall economic, health and country's recovery situation.  

Influence on rental prices: no significant change yet in regards to single-owned properties with strong developers, however in multi-owned projects where surplus of areas were also listed prior to the outbreak of the pandemic, a sharp decrease in rental prices occur, up to a level of ~ 50% decrease (some subleases are even offered at no rent, only maintenance and municipal tax).


8 July

There are no major changes with regards to market behaviors; there is still uncertainty and the same numbers of renewals/downsizing/lease acquisition thus it is very hard to predict the influence on market situations, occupancy and prices. However, Israel seems to be at the beginning of another COVID-19 wave therefore on Sunday 5 July, the Government announced that they are considering returning to some restrictions, currently discussing public gathering only, to be returned to up to 50 instead of 250 people. 

Business, retail and offices at this stage are operating as normal but a number of daily infections returned to high (highest was last week 1,014 people / day). 

Cultural events and airlines are still closed with no date due for return. 

There is greater willingness to reduce rents in small office areas (up to 300 sq m) in condo buildings, vis-à-vis leading LLs which are still not ‘jumping’ to reduce asking rents but rather give other flexible terms instead. It seems that both scenarios are not yet in scale enough to point to a trend. 

There are daily announcements vis-à-vis companies working from home / looking for subleasing etc. 


21 May


In Brief  

Israel has been in strict but effective quarantine since the beginning of March until end of April / beginning of May, which has resulted in a relatively low mortality rate of 1.6 cases per every 100k people (as of end of April and even lower since then). In correlation and due to public pressure of industry leaders, Israel also performed the most accelerated ‘exit strategy’. 
During the quarantine period, interesting income solutions were seen in various economic sectors; Israel’s airlines provided rescue and cargo flights, most businesses were open for online delivery, highly flexible for the customer re: returning products and monetary refunds (stores that had never performed online service before), various online classes and more. 

Current Situation 

As of 20 May, almost the entire Israeli market has returned to regular activity. This includes: 

  • All businesses were allowed to return to 100% capacity of employees in the office (in practice, most businesses returned to 50-80% capacity of physical attendance of employees, exercising a ‘team-by-day’ model where half the day certain groups are at the office and the other half are working from home and on other days vice versa). 
  • All retail and shopping centres are open 
  • All educational systems are open (in a half-capacity model; every 3 days permanent students/children groups are changing)
  • Any movement or gathering limits were removed
  • All public transport (excluding trains) is working
  • All touristic institutes (Hotels etc.) are open including food halls (excluding buffet) and swimming pools

This excludes however, the food & beverage and cultural sectors, which are due to open on 27 May. Events (wedding, shows etc.) are due to open on 14 June. Israel’s airport is due to open on 1 July. 

Real Estate Trends during March-May 2020 

  • No major change occurred; few transactions were put on hold and less marketing activity occurred, but construction remained a necessary operation and continued. 
  • Almost no rent concessions were given by landlords and if so, were in small percentages or in forms of payment delays. 
  • Serviced offices experienced a sharp decrease in occupancy and discounts were given to some of their tenants. 
  • The general feeling is that demand is renewing slowly, and marketing is re-entering to a high gear. 
  • Rent levels may decrease in old office spaces which remained vacant. 
  • Capital markets still on hold, the general feeling is still uncertainty.

Governmental Fiscal & Monetary Policies  

  • The Government is currently forming an Economic Stimulus Plan in the form of reduced taxes, loans and cash grants for small - medium-sized businesses. It has opened the option to apply for a grant starting 21.5.2020 until 1.7.2020 for business owners. There are many conditions for getting this grant, such as a 25% reduction in the activity cycle on the 4 months (March to June 2020) relative to 2019. 
  • The Ministry of Finance Aid Program at NIS 100 M will include a grant fund to encourage employment and a credit fund for high risk businesses. 
  • Banks can postpone mortgages for at least three months. 
  • Occupiers received a municipal tax reduction of 25%. 
  • The National Insurance Institute gave up to 70% of salaries for those forced to leave their jobs. 


7 May

From the 3 May, the Israeli Government has opened the market to regular activity in full capacity - i.e. no longer only 30% of employees are allowed to return to offices but the entire company, aside opening street stores and limited educational bodies. Malls, restaurants, bars and cafes, main educational bodies, some businesses which by their nature receive audiences, cultural institutions and events are still not allowed to be opened. 

  • Government is still debating economic incentives for those (businesses) who were affected by COVID-19. 
  • No rental incentive / discount has been given by landlords at any stage. 
  • There has been no significant effect on occupancy rates due to majority of long-term leases in flexible office space. 
  • There is a slight slowdown in construction due to lack of essential construction employees, and developers are having difficulty streamlining capital. 
  • The market is still cautious. There is no immediate return to regular business activity nor re-initiation of transactions. Capital markets are still dormant, and investors are cautious - it is too soon to draw any conclusions on the influence of COVID-19 on real estate. 


23 April

Occupier Market - uncertainty; new lease acquisitions seem to be on hold (few transactions of over 5k sq m that were in progressed stages prior to COVID-19, have now ceased), however negotiations for long-term acquisitions for global corporates continue as usual. 

Landlord Market - occupiers are asking for rent reduction but no legal decision in this matter (except from municipal tax reduction of ~25%) has been taken; mostly leading developers trying to assist as they can, whilst small landlords reject such requests. Although retail is most affected, no special discount has been given. With new lease acquisitions, we are witnessing a willingness on the part of landlords to reduce the asking rent by ~10%. 

Capital Markets - we're seeing stagnation in the market. Sellers are not yet compromising yields and buyers, due to uncertainty and risks, are asking for a much higher return than previously.  

Government decisions: as of today (19/04/2020), some relief was given regarding quarantine prohibitions, such as raising the office capacity of employees from 10% to 30% (subject to hygiene protocol) and specific retail (i.e. electronics) can open but on street level only. The majority of markets are now working on their own strategy and are taking conscious steps to determine how to return to a working routine. 


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