The listed segment of the Israeli commercial real estate market is undergoing a rapid process of expansion. The continuous development of modern properties, which are being listed on the Tel Aviv stock exchange through acquisitions by public companies as well as securitisation, means that foreign investors face an evolving and transparent market.

“The market is interesting because the listed part is growing and becoming more transparent,” says Nirit Bregman, co-founder of Bregman-Baraz Real Estate. “The market is in transition, meaning the bigger market players, especially the listed companies, understand they have to be more transparent in order to attract foreign investors.”

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Despite the Israeli real estate market still being in a relatively nascent stage of development, listed companies have good growth prospects due to the concentrated nature of the market. “The companies in the retail sector face a significant advantage of economies of scale, so we think this process will continue because the companies that are already big in retail, for example, can gain by becoming even bigger,” says Daniel Baraz, co-founder of Bregman-Baraz Real Estate.

“The capitalisation rates are high compared to other developed countries. The capitalisation rate spread in relation to Finland, a market whose size is comparable to the Israeli market, is almost 2%. These high yields render the market interesting from an investment perspective. In addition there is a lot of new developments on the one hand, and on the other hand, troubled real estate companies that might need to sell properties – the combination of which may create opportunities for buyers.”

With two real estate investment trust (REIT) regimes established following the creation of the 2006 REIT regime, and the listing of the Azrieli Group in 2010 that brought nearly $3bn-worth of properties onto the Tel Aviv stock exchange, the commercial real estate market is gaining momentum. “The total fair value of properties managed by listed companies is $19bn,” says Ms Bregman. “And according to our estimates, the listed market is 20% to 30% of the total income-producing sector in terms of gross leasable area.”