Jerusalem’s Tattered Downtown Is Slowly Getting a Makeover

The city has invested $75 milion to beef up downtown streets, while developers have been building luxury residential projects. But none of these steps have lured many Israelis to live in the heart of the capital.

Itay Sikolski

The beautification of Tel Aviv has been a breakneck process, driven mostly by private enterprise, together with city development plans. In Jerusalem, it’s a different story.

The capital of Israel is in some sort of transition. The potential inherent in reviving the city center is enormous and the private sector is raring to go, but the road to gratification still looks very long.

In Jerusalem, the center is defined as the section between the western entrance to the city, through to Jaffa Gate of the Old City, and between HaNeviim Street in the north to King David Street and Agron Street in the south. That is the historic heart of the modern city of Jerusalem, built mostly during the period of the British Mandate until 1967 (during which time Israel controlled only West Jerusalem). After that, things changed.

“The construction of the new neighborhoods in the 1970s and 1980s, like Gilo and Pisgat Zeev, Ramat Beit Hakerem and others, and the erection of nearby towns like Mevasseret Zion and Ma’aleh Adumim drained the city center of masses of residents. The strong population left the center,” says Lior Bar-Dor, a veep at Eden, the Jerusalem Center Development Company, a municipal company. The erection of the Malkha mall dealt another blow to the city center, he says, and when the security situation began to deteriorate in the 1990s and 2000s, with downtown Jerusalem targeted in a number of terror attacks – that didn’t help. Eden was founded in 2001, as a subsidiary of the Jerusalem Development Authority, to reverse the fortunes of the center of town.

The overall status of the city’s hub is highly vulnerable to outbreaks of violence. Every incident, from a solitary stabbing to rocks thrown at the city tram line, to war in Gaza, hurts the downtown area economically, not least because tourism evaporates.

On the other hand, that tram line, for all the griping about it, has made the city center much more accessible. So far about 300 million shekels (roughly $75 million) has been spent on beefing up infrastructure, which is a fancy way of saying it’s been fixing the sidewalks and streets, as well as the subterranean pipelines, which the city thought rather crucial to making itself attractive anew. Eden redid Gan Atzmaut (Independence Park) as a venue for mass cultural events and enabled a café to open on the spot. It also fixed up the central streets of Agrippas, Bezalel, Agron and King Solomon. Recently work began on turning Shlomzion Street into another vibrant artery leading to the Old City.

Reviving this artery, in fact the whole complex, is being carried out mainly by private enterprise, but not without public aid. In the last two years Eden has focused on helping businesses develop culture and tourism in order to attract visitors to the center.

The plan is for Eden to become the management company of the downtown area, with an expanded mandate – not just building infrastructure but planning content. The Jerusalem city center presently has about 1,200 businesses, alongside thousands of offices. The unique architecture of Jaffa Road, which cuts through the entire city center and along which the light rail runs, makes it look like a street in a historic European capital. It harbors a great range of businesses, from fashion boutiques to cafes, bazaars (on Jaffa Road), restaurants, Judaica stores, jewelry design stores, galleries, assorted small shops, nightclubs, and pubs. Many are new.

Ultimately, the authorities can contribute infrastructure and atmosphere as well, but revival requires the private sector to build hotels, commerce and housing. Central Jerusalem today has 1,019 hotel rooms, a figure Eden projects will climb to about 2,600 within five years, thanks to a decision by the Jerusalem authorities to shorten the time it takes to get approvals.

Another example of the involvement of private enterprise in the city center is the building between Hillel and Shammai streets, formerly the headquarters of the Israel Lands Administration. The builder Avraham Bleicher bought it and plans to turn it into a boutique hotel. Another example is the old Zion Hotel building, bought by the Nakash brothers, who are renovating it as a modern hotel.

A mecca for boutique hotels

In fact a lot of boutique hotels are opening up in central Jerusalem, widening the choice for tourists beyond the large, luxurious but non-central hotels. The Atlas hotel chain, for example, has opened its second boutique hotel, the Arthur, after the success of its first, the Harmony. “We’re 10-15 minute walk from the Old City and offer tourists a quality hotel, but for much less than the city’s luxury hotels,” says Ayala Dekel, manager of the Alfred. “About 60% of its guests are foreign tourists, the rest Israelis.”

Much of the investment in the downtown Jerusalem comes from abroad, or from affluent immigrants. One prominent name is Oren Levy, who emigrated from France about a decade ago. The owner of a large optical chain in France, Oren operates a philanthropic optical clinic providing diagnoses and glasses for a token price to needy children in Jerusalem.

He’s also become a player in Israeli housing for investment, owning 60 luxury apartments in central Jerusalem, worth about 300 million shekel (about $78 million). Most of the apartments are rented for short terms of a few days to a month or two. “I want to achieve 100 hotel suites but unlike a regular hotel, my hotel will be all over the city,” he told TheMarker in an interview a year ago. He runs his apartments through a management company he set up, which rents them out online as well as through local brokers.

Making over Bloc 50

One of the clearest signs of a city center under rehabilitation is residential real estate activity — and indeed there’s a lot of it in central Jerusalem. Activity started about 10 years ago on the compound known as “Bloc 50.” The domain name is an abbreviation of the block number — 30,050 — which defines a space of 25 dunams (about 6 acres) located between Jaffa Road, the predominantly ultra-Orthodox HaNeviim Street, Rabbi Kook Street, and Strauss Street. The compound is distinguished for its buildings of historical and architectural value, including the Bikur Holim hospital, Anna Ticho House and the Rabbi Kook Institute. For years, “Bloc 50” was marked as having special potential because of its location, but nothing much happened, due to a combination of ownership and planning problems. It remains neglected, partly vacant and those who do live there are mainly from marginalized communities.

After 30 years of trying in vain just to pass plans to revive the dump, the city succeeded in doing so in the year 2000. The plan called for construction over 80,000 square meters, while maintaining green spaces and historic buildings. But then, as usual in Jerusalem, so used to disappointments, the Second Intifada broke out, delaying the development by years.

Nearly a decade ago, Minrav group closed a “combination” deal to develop Lot 2 in the complex, located on Strauss Street. Minrav erected a 13-story building with 62 apartments, completing it in 2008, and racking up sales of about $176 million. Lev Leviev’s Africa Israel group also got involved, building a project at 7 Rabbi Kook Street, including a closed housing complex with 131 apartments, next to Mercaz HaRav Kook and Anna Ticho House.

Elsewhere in the city center, east of Bloc 50, Africa Israel erected the HaNeviim Court project, located on the corner of Heleni Hamalka and Monbaz streets. HaNeviim Court has 143 apartments with two to four rooms and luxury penthouses with a view of the Old City. The first floor features a boutique hotel with 69 rooms and shops that are currently for sale. West of Bloc 50, the company is setting up the Savyonei View project, at the intersection of King George and Jaffa streets, where the historic Mapai building stands. The project will include a shopping center next to a luxury housing and office tower, with 170 apartments of two to five rooms. East of bloc 50, at 25 HaNeviim Street, Azorim is building a project with 88 apartments, which it expects to complete by next year.

Upgrading the Mahane Yehuda area

West of Bloc 50 is bustling too, especially around the Mahane Yehuda open-air market. Alliance Israelite Universelle - KIAH South is a complex of 20 dunams (about 5 acres), consisting of three plots. One is owned by British entrepreneurs, represented by Nahum Rosenberger, on which a hotel belonging to the International W chain will go up; another plot is jointly owned by the British investors and the JTLV Foundation, headed by Former CEO of British Israel, Amir Biram. The plot was purchased from Housing & Construction Limited, and Biram and Rosenberger intend to connect it to Mahane Yehuda. They plan to build small apartments of 50-70 square meters, but won’t discuss prices. “I want it earmarked for Israelis,” says Biram.

The project next door can tell us something about pricing in the area, though. Built by Minrav on a corner, at 103 Jaffa Road, the J Tower project has 148 luxury apartments on 19 stories, a boutique hotel, and a shopping center planned by the architect Guy Igra. Four-room apartments in the J Tower, spanning 105 square meters , plus a 10-square meter porch, are being offered for NIS 3.6 million. The most expensive apartment in the project, a seven-room penthouse of 230 square meters and and a 40-square-meter porch, is being offered for NIS 18 million. That’s about the same price range as in Bloc 50.

These luxury projects with their high management and maintenance fees are out of range for most Israelis. The figures prove it: In 2008 the area known as zone 84, which defines the Jerusalem city center, had 6,231 residents. Since then the number has declined. In 2013, the most recent figure available, the Jerusalem city center had 5,950 residents. That is significant because from 2010 to 2012, there were 676 building starts in the city, which should have boosted the local population. The fact that the population did not grow says everything about the demographic benefit of building these apartments in the heart of the city.

The municipal authorities who granted wholesale approval of construction for foreigners a decade ago have taken flak for it. Yair Shapira, planner and researcher at the Jerusalem Institute for Israel Studies, confirms it. “Housing in the city center is mostly not being bought by the local population, but market forces are very powerful, and it’s hard to go against them and tell a builder, go build affordable housing," he says. "You also have to understand that the local authorities would prefer any development over continuing neglect, not to mention the betterment taxes it’s getting from the builders.”

Between 2006 to 2011 the Jerusalem Development Authority granted scholarships to students who moved to the Jerusalem city center, in order to spur the area’s development by bringing in young people. The scholarships started at 6,900 shekels a year in the beginning, but gradually shrank to 3,400 shekels. By the time the program wound down, the scholarships covered only about a quarter of a student’s monthly rent. But the plan worked: about 900 students made the move.