When Tel Aviv's Shopping Mecca Loses Its Allure

Once the only luxury shopping district, rents at Kikar Hamedina have plunged and the square is distinctly down-at-heel; Lacoste took its crocs home, Vuitton packed its bags.

Something disturbing has come over Kikar Hamedina. The sparkle of the exclusive shopping district considered Tel Aviv’s answer to the Champs-Élysées seems to have fulled. Store rents have fallen 30% to 40% over the past few years while iconic stores such as Louis Vuitton and Lacoste have packed up and moved on. “For rent” signs hung on 10 uncharacteristically vacant storefronts during a recent visit to this local luxury mecca.

Landlords and business owners say several unrelated factors have come into play simultaneously. These include a lack of parking, a shortage of stores with a lot of floor space, competition from Ramat Aviv Mall and a revitalized Dizengoff Street, the square’s rundown appearance and an increase in overseas shopping, either during trips abroad or over the Internet.

Real estate agents say monthly rents have fallen to NIS 300-NIS 400 per square meter, from NIS 500-NIS 600 a year ago.

"I can't remember a time like this and I've been here since 1982," says the owner of Yechieli Properties, Yechiel Sharvit. "There was always huge demand. A year or a year and a half ago people would wait in line for an available space to rent."

In June, after 12 years at Kikar Hamedina, Louis Vuitton relocated to Ramat Aviv Mall. Sharvit says the luxury boutique’s move reflects one of the square’s most pressing problems: the small size of available stores. "Louis Vuitton wanted to stay on the square but they wanted 500 square meters," he explains. "Their store was 60 square meters with an interior balcony and an 80-square-meter basement - 140 square meters in all on three levels – which doesn't suit the new concept they wanted which includes expanding their collection."

Store size is indeed a long-standing problem on most Israeli commercial streets, forcing chains like H&M and Zara into locating exclusively in malls. The complexities of combining multiple storefronts into a single space make that option a rarity.

While competition from Ramat Aviv Mall and other shopping streets isn't new, until a year or two ago landlords could get higher rents because of the area’s luxury cachet.

According to the joint general manager of the Tel Aviv-Center branch of Anglo Saxon realty, Oren Glazer, the gap between store rents on Kikar Hamedina and on Dizengoff Street and other popular retail areas climbed out of control.

Stores on Dizengoff Street can be found for monthly rents of NIS 200-NIS 250 per square meter, while Kikar Hamedina prices approach those of the malls, Glazer says. While the square’s brand name is strong, he says, “It doesn't have the turnover of the malls. Rents climbed too high and there were no vacant stores. Several landlords 'played poker' and wouldn't lower their prices, and then a number of stores became vacant at the same time.”

Glazer says that after a correction a balance has been reached. “The latest deals closed at NIS 400 to NIS 450 per square meter," he says.

Tel Aviv's carriage trade is small and limited to Kikar Hamedina and Ramat Aviv Mall. They are virtually the only places in the city to find exclusive labels such as Prada, Versace, Dolce & Gabbana and Christian Dior.

Nationwide problem

Sharvit says that Kikar Hamedina is no different than other retail areas in Israel. "It’s a national problem. Two years ago there was high commercial demand, malls were full, prices and management fees were high and brand owners paid up." Other shopping areas in Tel Aviv are also in decline, he says, though the blow to the high-priced luxury market is generally harder.

Business owners are also upset that customers who come to the area to spend thousands of shekels encounter surroundings that don't live up to their image.

"The issue of parking is very important to the square, and there isn't any," says Sharvit. "If a customer double-parks to pick up purchases, a city warden turns up within two minutes to issue a ticket, and this deters people."

In addition, he says, the square itself - really a circle - is filthy and is not cleaned regularly, trash is not collected every day, there are stray cats all over the place and the sidewalks haven't been replaced in nearly 30 years.

"The main problem is the city's neglect in promoting the square," Sharvit says. "It's scandalous. There is neglect and no uniformity between the stores and signs. [Stores] open at 10 A.M. and close at 6:30 or 7 P.M., which is early. There is no store owners’ association or strong committee promoting the square. Store owners and vendors don't demonstrate solidarity. Everyone opens at a different hour and closes when they feel like it."

Another issue is stagnation. According to Sharvit, only two major French brands have come in recently, a Mauboussin jewelry boutique and a luxury housewares shop. Nicol Raidman, star of the Israeli version of “Real Housewives” (“Me'usharot”), sparked a wave of media fanfare two years ago when she launched her new store, Madame De Pompadour, but it hasn't helped the square’s overall fortunes.

"Luckily, there are a number of strong names in fashion: Helga Design, Enigma, Amor, Philosophy, Burberry and Ralph Lauren; strong shoe stores like Emanuel; and the Padani and Swarovski jewelry stores," Sharvit says. "They bring in the top brands from overseas and this attracts foreign residents." The list should also include the popular Goodies café, where Tel Aviv’s old elite meet on Friday morning.

To Kikar Hamedina's credit it should be pointed out that other trendy spots in Tel Aviv such as Dizengoff and Sheinkin street also share in the malaise, each suffering from the heat, lack of parking, absence of central administration and overly small properties. But most of all they are all suffering from inclement economic weather, a decline in consumption and the move toward cheaper goods. Boots costing NIS 3,500 are no longer trendy after the cost-of-living protests and in a period of belt-tightening.

Daniel Bar-On
David Bachar