Real-estate investors banking on Israeli demand for office space

For some business investors and companies, Israeli office buildings are becoming a prestigious long-term investment. In addition to capital gains over time, long-term rental contracts offer the possibility of a steady flow of income.

And prices are falling in Tel Aviv and the central region by 15 percent to 20 percent in 1996, and in some areas dropping by even 30 percent, says Zion Ezer, general manager of Bank Mishkan. The decrease is mainly due to the growth in supply that is expected to increase even further this year, due to the number of building starts in 1995. Among the major developments in construction are Meshulam-Levinstein's office tower and the Shalom complex.

Contractors and real-estate agents agree with Ezer's perception of the market. Office prices are 15 percent less than they were at the end of 1995, according to Amos Glezer, head of Anglo Saxon Real Estate, Tel Aviv.

Shauli Litan, general manager of Meshulam-Levinstein, confirms this.

"Up until recently, people did not purchase anything since they were uncertain whether prices had reached rock bottom. But in the last three months there has been a rise in demand."

One of the biggest office real-estate transactions signed in recent years was concluded two weeks ago, giving a real boost to Tel Aviv's depressed market. Bank Hapoalim purchased office space in Rubinstein Towers on Harakevet Street for a total of $65 million. The bank acquired 166,500 square feet of space for $41,580 million and leased 82,080 square feet at $144 per square foot per month. In addition, the bank purchased an underground car park with 464 spaces.

The Rubinstein building is being developed by the Rubinstein Company, Ofir of the Amot Investment Group and Granite Hacarmel. The developers intend to invest a total of $40 million in the construction of the development.

The purpose of the purchase is to relocate the bank's headquarters, which are presently dispersed throughout a large number of buildings around the city. Occupancy in the Rubinstein Towers is scheduled to begin in about a year's time, after which Bank Hapoalim will vacate tens of small- and medium-sized offices in Tel Aviv, creating about 162,000 square feet of empty office space.

According to Anglo Saxon, the location of this office space has a major influence over their marketing strategy. The agency highlights the name of the building and its occupants and lists convenient access to major thoroughfares like the Ayalon Expressway and Geha Road. Also important is access to services such as banks and post offices, and parking.

"A developer will fail to sell or rent his offices if parking facilities are inadequate," says the agency in their real-estate directory of business and commercial real estate.

*Israel Land Development Authority has approved a plan to construct 650 apartments in Jaffa, on a plot bordering Bat-Yam. The development is estimated at $120 million. Developers of the neighborhood will construct 12-story buildings. The price of a three-room apartment is expected to range from $150,000 to $200,000.

*Haifa Municipality has published a tender inviting developers to submit bids to purchase a 16-acre plot in the center of the Carmel. According to the tender conditions, the developers are required to construct a 183,600-square-foot auditorium on the plot within 26 months. The development will include a four-story underground car park for 400 vehicles and 59,500 square feet of commercial and entertainment space.

*Y. Moskovitz has won the Israel Land Development Authority tender to construct 170 housing units in Tel Hanan.

*Plassim has won an Israel Land Development Authority tender to construct 60 apartments and a commercial center in the Naot Ashkelon B neighborhood in Ashkelon. The company intends to construct four buildings, each of eight floors, above the commercial center. About $14 million will be invested in the development. Occupancy is scheduled for 1998.

*Uri Dori construction firm is offering Ramat Aviv residents a special scheme in an attempt to increase sales. The developer of the Ramat Aviv Facing the Sea complex is offering buyers a 5 percent discount on the price of an apartment or a 15-year mortgage at 3.9 percent interest. Upon completion, the development will include two buildings, each one comprising nine floors. The price of a five-room, 1,503-square-foot apartment with a 117-square-foot balcony starts at $467,000, including VAT.

*Developers of the Kiryat Rabin development in Holon announced the sale of two 4.5-room eighth-floor penthouses, each for $373,000. The Kiryat Rabin neighborhood will eventually consist of 168 apartments in seven buildings.