Israel cashes in on foreign execs with luxury rentals

JERUSALEM — The massive influx of multinational companies seeking to do business in Israel is boosting the Israeli rental market.

One result is a new demand for luxury apartments for business executives who stay in Israel for more than a few days.

While real estate prices have been falling for the last year and a half and luxury homes have suffered the sharpest decrease, demand for small, fully equipped luxury apartments in the Tel Aviv area remains relatively high. Centrally located one- or two-bedroom flats have become very popular among foreigners, who once preferred the large private houses of Herzliya-Kfar Shmaryahu. Now, only foreign diplomats are interested in that market.

Chaim Agi, general manger of MAN properties, believes the executive apartment market is becoming more attractive, with a fixed demand for 150 to 200 apartments a year. His firm recently signed an agreement to become the local representative of Prudential Referral Services.

"Finding residences for foreign companies that relocate their executives is a tough task," he said. "Those mangers, who usually come to Israel for six months to two years, have high demands and specific requirements."

Foreign executives are mainly looking to rent a two-bedroom apartment along the beachfront. They demand high-quality furniture, a doorman, air-conditioning, a parking space, daily cleaning services, a kitchenette, a gym, a sauna, a swimming pool and a nice view. Such one- to two-bedroom apartments can be rented for $2,000 to $4,000 a month.

According to Agi, these apartments represent a business opportunity for investors who are interested in the property market. "Today you can buy a fully equipped one-bedroom apartment for $350,000 and rent it out for at least $2,000. Buying a non-luxury apartment in the Tel Aviv area for the same price would only yield $800 to $1,000 a month."

It should be noted, however, that the costs of holding a luxury apartment are relatively high and can reach $500 a month due to maintenance and depreciation. In addition, the flat could remain empty for several weeks until a new tenant moves in.

Another problem is finding such a flat, as the number of apartment hotels that offer all the required facilities is limited.

Orna Ben-Nun, manger of Yamit Hotel, Tel Aviv's first apartment hotel, said that all the suites in the hotel were sold years ago to foreign residents. "I don't know about anyone who wants to sell his apartment. On the contrary, most of them are looking to buy out their next-door neighbor."

Ben-Nun added that apartment owners usually spend a few weeks a year in the apartments and rent them out for the remaining time for $4,000 to $8,000 a month. She said most of the executive renters are only staying in the hotel for a few weeks before returning to their country or moving to a permanent residence.

Most visitors to the Yamit hotel are diplomats, businesspeople and representatives of companies that are involved in large infrastructure projects such as the Trans-Israel Highway.

According to Agi, the average client is 35 to 40 years old, works in telecommunications or software and is married with no children. These executives usually spend the first few weeks in Israel in a regular hotel room before they start looking for a more comfortable, permanent residence, like an executive apartment. An executive will usually come alone for the first six to 12 months, after whi ch time the spouse will arrive. Therefore it's important that the apartment suit both people's needs.

Agi believes the crisis in the hotel industry could have been partly solved by customizing hotel rooms for foreign executives. "Instead of complaining about the lack of tourism, the hotels could have entered this market by adding kitchens to their suites," he said.

Even if hotel owners take Agi's advice, there is no guarantee it would be enough to save the ailing industry. It could, however, lead to higher competition in this relatively untapped market, which in turn could ease the shortage of executive apartments.