Despite forecasts that office rental prices in the Tel Aviv area would decline due to disruptions caused by construction of the area’s light rail system and expectations of an oversupply of space, rental rates in the region remained high in 2015.
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The northern Tel Aviv suburb of Herzliya, which is home to a large number of high-tech offices in its western Herzliya Pituah section, saw average office rents rise by 6.3% to 85 shekels ($21.67) per square meter, nearly reaching levels in Tel Aviv itself, a survey conducted by MAN Properties found.
Outside of the Tel Aviv region, office rates in Haifa also rose 6.3%, to 67 shekels per square meter. In Jerusalem, meanwhile, they remained stable at 65 shekels per square meter.
“Demand in Herzliya is large and substantial compared to the small amount of available supply for rent,” said Jacky Mukmel, MAN’s CEO and founder, who added that almost all the potential locations for office construction in the coastal suburb have been developed.
In the city of Tel Aviv itself, average office rents inched up from 85 shekels at the end of 2014 to 86 shekels per square meter at the end of 2015, the survey found. The suburb of Ramat Gan saw office rental rates jump 5.9%, from 68 shekels per square meter to 72 shekels. In the Tel Aviv suburb of Ra’anana, average rates jumped 3.4% in 2015, to 60 shekels per square meter.
Rates fell in some other Tel Aviv suburbs, however, including Lod, Petah Tikva and Rehovot. They remained stable in Netanya. Mukmel said Petah Tikva is languishing and has an oversupply of office space. Average rents there declined from 60 shekels per square meter to 58.