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Israel Real Estate Report Q4 2010
Business Monitor International, Oct 2010, Pages: 60
Key Insights on Israel’s Real Estate Sector
Relative to other countries whose commercial real estate sectors are profiled, Israel stands out because the market protagonists have successfully balanced supply of rental property with demand. The global financial crisis appears to have had virtually no impact. Rental rates and capital values fell by single digit amounts in Tel Aviv over the course of 2009, but tracked sideways in Haifa and Jerusalem, the other two cities for which data was gathered.
Given vacancy rates that are in double-digits and, in some sub-sectors, around 20%, this means there is insufficient supply of high quality commercial real estate. As is the case in other countries, the supply of new high quality property is widely seen as a positive for overall rental rates. One indicator of the optimism in Israel's commercial real estate sector is the planned commencement of construction, but not completion, of new projects, which is seen as the catalyst for the next increase in rentals.
Israel's overall economic environment is benign. The authors anticipate growth will accelerate this year, after a year of stagnation (but not recession) in 2009. Manufacturing is growing, and thanks in part to the dynamics of the labour market, it seems reasonable to expect steady growth in consumer spending. Nevertheless, it is important to note that the reality of the commercial real estate sector has, since the beginning of 2010, been less exciting than our in-country sources were expecting as recently as March. Rental rates have tracked sideways, rather than soaring by double-digit amounts as anticipated. Singledigit growth is now forecast for Jerusalem and Tel Aviv in 2011 and rents in Haifa are expected to stay unchanged next year.
The authors still believe that it is reasonable to look for a gradual re-rating of Israeli commercial real estate over the coming year. They expect yields will fall gradually across the board, as capital values rise faster than rental rates.
Key Features of This Report
This is the latest edition of a new series of industry reports that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that the report seeks to answer for each country remain as follows: what are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 the authors introduced a very substantial new improvement to the reports. They incorporated data and qualitative observations provided by commercial real estate agents operating in the countries surveyed. As a result the authors gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. They also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
In Q4, the authors have incorporated a lot of new data in relation to rents and yields in 2010. They gained this data by way of a new round of interviews with their in-country sources in mid-2010. In some cases, the latest information from their sources has caused them to make significant revisions to their forecasts for 2011-2014. They asked their sources to indicate what growth in rents is likely for 2011. They explain their answers in the Industry Forecast Scenario.
Israel Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Israel's Real Estate industry.
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