High-tech Firms Come Home Again to Central Tel Aviv

They’re replacing cost-conscious investment houses and insurance companies that are moving to the suburbs.

Raz Smolsky
Raz Smolsky
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Bird's-eye view of Rothschild Blvd. in Tel Aviv, a hotbed of start-ups.
Bird's-eye view of Rothschild Blvd. in Tel Aviv, a hotbed of start-ups.Credit: Aviad Bar-Nes
Raz Smolsky
Raz Smolsky

A sea change is happening in Israel’s office real-estate market as high-tech companies return to central Tel Aviv and replace financial firms, says Inter Israel, an arm of global real-estate giant Cushman & Wakefield.

High-tech outfits used to rent in lower-priced areas such as northeast Tel Aviv’s Ramat Hayal neighborhood, as well as in Herzliya Pituah and Ra’anana north of the city. But now they’re willing to spend more and pamper their employees, says Inter Israel in its second-quarter survey of income-producing properties.

The high-tech companies moving back aren’t normally big-name firms like Nice, Amdocs or Intel; they’re smaller, younger ones looking for the right atmosphere, says Inter Israel partner Ofek Gabai.

Wix, which develops a platform for building websites and conducted its Nasdaq initial public offering six months ago, is now located at Tel Aviv Port. The startup Revizer has rented out 2,000 square meters on Tel Aviv’s tony Rothschild Boulevard.

Other high-tech firms with offices in central Tel Aviv include Autodesk and WeWork, which has rented offices on Dubnov Street.

“These aren’t companies that employ engineers with Mazda 3s, so they’re not large consumers of parking spaces like the older firms,” Gabai says. “The entry of high-tech companies in the past six months to central Tel Aviv symbolizes the trend — high-tech is no longer looking for the lowest price, it’s pampering its employees and guests.”

Well, the companies are smaller, but they’re not necessarily minnows. Because of the high rents, most of the firms have already raised significant amounts of money and have high valuations.

And some of the names are big ones. Facebook is moving to Rothschild Boulevard from suburb Ramat Gan; it recently rented out 4,000 square meters. Another big name in central Tel Aviv is Google.

“The employees ride bikes to work and the companies provide shower areas and parking spaces for bicycles in the buildings,” says Gabai. “High-tech companies have come to Ra’anana, Hod Hasharon and Kfar Sava because there are lots of high-tech people in the [central] Sharon region. But Rothschild Boulevard is a different type of high-tech; it’s mostly companies that aim for younger, creative and more-flexible-thinking employees.”

As the trend deepens, Rothschild Boulevard is losing its flavor as a financial center. Insurance companies and investment houses are moving to Ramat Hahayal, the Diamond Exchange area in Ramat Gan, and Petah Tikva, another suburb.

Financial firms are irked by the high property taxes and rents in the city center, Gabai says.

Rents on Rothschild are among the highest in Israel, about 108 shekels ($32) per square meter in the second quarter, little changed from the previous quarter, according to Inter Israel.

Inter looked at some 2.2 million square meters of office space in 129 buildings in Tel Aviv, as well as in Ramat Gan and Bnei Brak.

Occupancy rates in Tel Aviv were extremely high at 98%, compared with 92% in Bnei Brak because of the many new office towers there. The average rent in Bnei Brak was 72 shekels per square meter, the same as in Ramat Hahayal.



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