COVID-19 Impacts on Israel Real Estate

Stav Cohen • 1/14/2021

Israel was under lockdown from 25 December, whereby offices could be occupied by up to 50% of employees, restaurants could open for takeaway and educational bodies operated as usual. 

However, since 8 January lockdown has become stricter with the closure of all retail, shopping centres, educational centres - school and kindergartens. Restaurants may only do deliveries and offices are closed, except for essential bodies such as Government, construction sites, medical etc. 

This current lockdown is until 22 January but may be extended for another 2 weeks. In the background however, business is happening as usual remotely and there is no ‘hold back’ on transactions. Israel is leading in the numbers of vaccines to the population so despite lockdown, the vibe is highly optimistic. 


30 September

As of 24 September, the Israeli Government made an announcement on additional market closures:

  1. Medium Closure started 18 September
  2. Total Closure as of 25 September until 11 October with an extension option
  3. Number of daily infections arrived at a peak of 7,000 people
  4. Closure measures:
  • All workplaces, except for approved essential workplaces that will operate under regulations;
  • Closing all restaurants, bars, shopping centres and malls, cultural activities, and markets;
  • Essential food and pharma shops will be allowed to continue operating;
  • Limit the distance from home to 1km, except for reasons that will be approved;
  • Gatherings of up to 20 people and within a radius of up to 1 km from home. (Regarding demonstrations - the decision is subject to an amendment of legislation in the Knesset);
  • The synagogues will be closed during the closure period, except for prayers on Yom Kippur in accordance with the approved outline;
  • Public transportation will operate on a limited basis;
  • Aviation - A decision will be submitted for approval on 24 September and
  • Closure of all sports except international games. 


16 September

The morbidity situation in Israel does not look good; the number of new daily patients exceeded 3,000 per day and now there is a sign of another closure for a period of between two weeks to a month, to be finally decided on Sunday 13 September 2020.

More and more companies are working in a hybrid format of combined work of a few days in ‘capsules’ from offices and a few days from home. Retail, shopping centres and restaurants are currently working as usual. The expected closure may change the overall economic, health and country's recovery situation.  

Influence on rental prices: no significant change yet in regards to single-owned properties with strong developers, however in multi-owned projects where surplus of areas were also listed prior to the outbreak of the pandemic, a sharp decrease in rental prices occur, up to a level of ~ 50% decrease (some subleases are even offered at no rent, only maintenance and municipal tax).


8 July

There are no major changes with regards to market behaviors; there is still uncertainty and the same numbers of renewals/downsizing/lease acquisition thus it is very hard to predict the influence on market situations, occupancy and prices. However, Israel seems to be at the beginning of another COVID-19 wave therefore on Sunday 5 July, the Government announced that they are considering returning to some restrictions, currently discussing public gathering only, to be returned to up to 50 instead of 250 people. 

Business, retail and offices at this stage are operating as normal but a number of daily infections returned to high (highest was last week 1,014 people / day). 

Cultural events and airlines are still closed with no date due for return. 

There is greater willingness to reduce rents in small office areas (up to 300 sq m) in condo buildings, vis-à-vis leading LLs which are still not ‘jumping’ to reduce asking rents but rather give other flexible terms instead. It seems that both scenarios are not yet in scale enough to point to a trend. 

There are daily announcements vis-à-vis companies working from home / looking for subleasing etc. 


21 May


In Brief  

Israel has been in strict but effective quarantine since the beginning of March until end of April / beginning of May, which has resulted in a relatively low mortality rate of 1.6 cases per every 100k people (as of end of April and even lower since then). In correlation and due to public pressure of industry leaders, Israel also performed the most accelerated ‘exit strategy’. 
During the quarantine period, interesting income solutions were seen in various economic sectors; Israel’s airlines provided rescue and cargo flights, most businesses were open for online delivery, highly flexible for the customer re: returning products and monetary refunds (stores that had never performed online service before), various online classes and more. 

Current Situation 

As of 20 May, almost the entire Israeli market has returned to regular activity. This includes: 

  • All businesses were allowed to return to 100% capacity of employees in the office (in practice, most businesses returned to 50-80% capacity of physical attendance of employees, exercising a ‘team-by-day’ model where half the day certain groups are at the office and the other half are working from home and on other days vice versa). 
  • All retail and shopping centres are open 
  • All educational systems are open (in a half-capacity model; every 3 days permanent students/children groups are changing)
  • Any movement or gathering limits were removed
  • All public transport (excluding trains) is working
  • All touristic institutes (Hotels etc.) are open including food halls (excluding buffet) and swimming pools

This excludes however, the food & beverage and cultural sectors, which are due to open on 27 May. Events (wedding, shows etc.) are due to open on 14 June. Israel’s airport is due to open on 1 July. 

Real Estate Trends during March-May 2020 

  • No major change occurred; few transactions were put on hold and less marketing activity occurred, but construction remained a necessary operation and continued. 
  • Almost no rent concessions were given by landlords and if so, were in small percentages or in forms of payment delays. 
  • Serviced offices experienced a sharp decrease in occupancy and discounts were given to some of their tenants. 
  • The general feeling is that demand is renewing slowly, and marketing is re-entering to a high gear. 
  • Rent levels may decrease in old office spaces which remained vacant. 
  • Capital markets still on hold, the general feeling is still uncertainty.

Governmental Fiscal & Monetary Policies  

  • The Government is currently forming an Economic Stimulus Plan in the form of reduced taxes, loans and cash grants for small - medium-sized businesses. It has opened the option to apply for a grant starting 21.5.2020 until 1.7.2020 for business owners. There are many conditions for getting this grant, such as a 25% reduction in the activity cycle on the 4 months (March to June 2020) relative to 2019. 
  • The Ministry of Finance Aid Program at NIS 100 M will include a grant fund to encourage employment and a credit fund for high risk businesses. 
  • Banks can postpone mortgages for at least three months. 
  • Occupiers received a municipal tax reduction of 25%. 
  • The National Insurance Institute gave up to 70% of salaries for those forced to leave their jobs. 


7 May

From the 3 May, the Israeli Government has opened the market to regular activity in full capacity - i.e. no longer only 30% of employees are allowed to return to offices but the entire company, aside opening street stores and limited educational bodies. Malls, restaurants, bars and cafes, main educational bodies, some businesses which by their nature receive audiences, cultural institutions and events are still not allowed to be opened. 

  • Government is still debating economic incentives for those (businesses) who were affected by COVID-19. 
  • No rental incentive / discount has been given by landlords at any stage. 
  • There has been no significant effect on occupancy rates due to majority of long-term leases in flexible office space. 
  • There is a slight slowdown in construction due to lack of essential construction employees, and developers are having difficulty streamlining capital. 
  • The market is still cautious. There is no immediate return to regular business activity nor re-initiation of transactions. Capital markets are still dormant, and investors are cautious - it is too soon to draw any conclusions on the influence of COVID-19 on real estate. 


23 April

Occupier Market - uncertainty; new lease acquisitions seem to be on hold (few transactions of over 5k sq m that were in progressed stages prior to COVID-19, have now ceased), however negotiations for long-term acquisitions for global corporates continue as usual. 

Landlord Market - occupiers are asking for rent reduction but no legal decision in this matter (except from municipal tax reduction of ~25%) has been taken; mostly leading developers trying to assist as they can, whilst small landlords reject such requests. Although retail is most affected, no special discount has been given. With new lease acquisitions, we are witnessing a willingness on the part of landlords to reduce the asking rent by ~10%. 

Capital Markets - we're seeing stagnation in the market. Sellers are not yet compromising yields and buyers, due to uncertainty and risks, are asking for a much higher return than previously.  

Government decisions: as of today (19/04/2020), some relief was given regarding quarantine prohibitions, such as raising the office capacity of employees from 10% to 30% (subject to hygiene protocol) and specific retail (i.e. electronics) can open but on street level only. The majority of markets are now working on their own strategy and are taking conscious steps to determine how to return to a working routine. 


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