Tech slowdown spooks Israel’s office market

The wave of layoffs in the Israeli tech industry and the slowdown in the closing of financing rounds are influencing the companies themselves and the market in general, in terms of office real estate.

“The demand for office space and the number of inquiries we receive has dropped significantly,” says Osher Ossi, owner of Synergia Real Estate Marketing and Consultancy, a real estate agent specializing in office space in the Ramat Gan Diamond Exchange area. “Medium-sized businesses are in no rush to move and are in no rush to sign new deals, and small businesses, which need 100-200 square meters, are afraid to make such a move right now.”

Another real estate personality who preferred to remain anonymous testified to a certain “sense of panic”, which he says stems mainly from psychological issues. “A lot of money has been poured into dream companies, pitches, concept, and there are a lot of companies that have evaporated,” he says. “There are companies that have a product, a value, a service and need to grow and survive, and there always will be, but the panic in the market is causing everyone to stop and to sit on the fence about new real estate transactions.”

99% occupancy in Gush Dan office towers

On the other hand, it looks like things aren’t really getting any worse just yet. For example, sublets – one of the clear signs of a slowdown in office demand – are still not happening in large numbers. According to Ossi, there is no subletting, both in the offices he rents and in those his colleagues rent. “We still don’t see any empty offices yet and there is no real slowdown among the big companies. In the new towers of Gush Dan, there is not really any free space and someone looking offices over 300 square meters won’t find anywhere available there. We’re talking peak demand and 99% occupancy.”

Natalie Marshall, owner of Marshall Strategic Real Estate Marketing, which specializes in income-generating real estate, adds: “No deal has fallen through so far and that’s the best indication of where the market is going. The slowdown is also related to the fact that we are entering months when people are working less in Israel and after the holidays (end of October) we will see a return to regular activities.Large companies have no problem.

Hundreds of thousands of square meters will be built in and around Tel Aviv

Concerns about slowing demand for office space from the tech sector are not just about the current situation, but also about future prospects with hundreds of thousands of square meters of office space under construction in Tel Aviv. only – with most spaces designed for tech companies.

For example: the Landmark project in Tel Aviv will offer 140,000 square meters of office space; The Azrieli Spiral Tower will provide 62,200 square meters of office space, equivalent to the three existing adjacent Azrieli Towers; the Exchange Tower in Ramat Gan will provide 60,000 square meters of office space; ToHa Tower 2 will offer 170,000 square meters of space, of which 143,000 square meters will be for offices.

To these projects are added the Wix Campus in Pi Glilot (north of Tel Aviv), which will offer 50,000 square meters of office space, the Eleph complex in Rishon Lezion with 1.75 million square meters of office and commercial space , the BSR City Towers in Petah Tikva, which will provide 160,000 square meters of office space, and in Jerusalem, Gav Yam Park near Hebrew University’s Givat Ram campus, which will provide an additional 270,000 square meters of office space.

But Marshall is not concerned, “All of these towers – Landmark, the Spiral, ToHa 2 and more are only expected to be occupied in the coming years between 2024 and 2027. The market has up to five years to fill them and I believe that It’s important to remember that there is a natural growth in the market and the light rail is also going to start operating in Tel Aviv so I don’t think there’s any need to worry about that In 2016, we received an additional 500-600 square meters at once in Tel Aviv when ToHa 1, Midtown, Alon Towers, Azrieli Sarona and others all received their occupancy permits almost at the same time. time – and it was all busy in just 18 months.”

Published by Globes, Israel business news – – on July 7, 2022.

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

Jose C. Birney