Office rent has risen 18% in Tel Aviv and Ramat Gan in the in the winter of 2008 compared with the summer of 2007, states Natam - Colliers International in its survey of class A office space. The survey is based on a sample of properties in the area.
Natam states, "Rental rates continue to rise, however in many locations occupancy rates have stabilized at nearly full occupancy. New office stock is releasing some of the pressure in the market for new product. In the investment market, investment yields remain unchanged at around 6.75%-7.25% for class A assets. Standard yield can reach 8% for other assets, and in the periphery, yields go up to 9.5%-10%."
Natam also notes, "The recession in the US has yet to affect the demand for new space and the demand for investment product, however some international companies have slowed the rate of expansion originally planned for 2008."
The survey covered 43 properties in seven locations: the courthouse area, the Begin Road corridor, the Allon Road corridor, Manshiyeh, the Tel Aviv City, central Tel Aviv, and Ramat Gan Diamond Exchange. The occupancy rate in these areas fell by 0.4% in the winter of 2008 compared with the summer of 2008, while rent rose 17.9% from an average of $16 per square meter to $18.82. The range of rent in the winter of 2008 was $16.11 per square meter in central Tel Aviv to $22.78 per square meter in the courthouse.
Natam notes that fluctuations in the shekel-dollar exchange rate have not affected Israeli real estate prices in nominal shekel values. Most landlords only quote rent in shekels. The survey continues to quote in dollars to allow for the continued tracking of the market by both local and foreign parties, and it applies an exchange rate of NIS 4/$, even though the actual rate is currently around NIS 3.30/$.
Natam predicts that short-term rent will rise, especially for smaller spaces that are ready for occupancy. However, rent will slow in 2009 as new projects are completed.
Meanwhile, office building management fees have risen 10% in the last three months because of rising prices of inputs, utilities, and services, according to a survey by AMY Participation In Properties 2007 Ltd. The increase is nationwide. The company noted that management fees run from NIS 20 to NIS 30 per square meter, depending on the location and age of the building, level of investment in it, services provided, and other factors.
Sources inform ''Globes'' that tenants in a number of office buildings in the Ramat Diamond Exchange were recently notified of a 16% hike in management fees.
Published by Globes [online], Israel business news - www.globes-online.com - on July 2, 2008
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