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Israeli Commercial Investors Continue to Bank Solid Profits

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As the global economy struggles to recover from recession due to COVID-19, investors are looking for growth – and sometimes searching for unique places to invest.

Commercial real estate is a great way to protect your money from inflation because the costs of new construction or property renovations move in tandem with economic growth.

This means that when inflation appears, rents can be expected to rise to keep pace  – especially if landlords and property managers are savvy enough to have an escalation clause that gives them substantial annual increases regardless of inflation.

Commercial Property Investing in Israel

The ability to minimize inflation risk through commercial real estate investment is an attractive feature for Israeli investors who want their money to earn more in a stable environment.

Investors also have the opportunity to maximize returns on investments, avoiding a lack of diversification that could arise if they were solely focused on stock markets during this time period where prices there seem especially frothy.

Undeniably, the demand for commercial space is on the rise in Israel. This is in large part to the Israeli government’s preference for commercial construction. In recent years, it appears new construction approval is granted more often for buildings involved in business services.

In the current market, investing in various types of commercial properties and/or private residential projects is a practice that is emerging as an increasingly viable alternative. Additionally, opportunities have expanded to meet foreign investors’ needs.

Israeli properties have also maintained a relatively stable price. This stands in opposition to many countries where lingering housing crises have resulted in inflated prices. This is one big reason US investors looking for commercial property have increasingly begun to consider Israel.

Growing Popularity to US Investors

According to Deloitte’s latest 2021 survey of the European housing market, Tel Aviv, a major city and economic center in Israel, was named as the second-most expensive city to purchase a property.

Despite this, Americans continue investing in property in Israel at an increasingly rapid rate. Early investors have seen spectacular returns on their real estate acquisitions, which encourages others to follow in their steps. 

With the property market in Israel remaining strong and stable, global asset managers and financial experts have picked up on this as an attractive alternative to other investments.

This may be partly due to the fact that property prices remain firm even after expectations for a drop in Israeli real estate prices failed to materialize.

Further, investing in commercial real estate offers many benefits, including income production, capital appreciation, and security. John Jacob Astor, America’s first millionaire, made his fortune through commercial real estate. Many success stories have followed in those grand footsteps.

Investment Opportunities for Commercial Real Estate

There are several ways to invest in commercial real estate.

You can go big with a full-scale mall or high-rise office building. A perfect example of this is the 91-story or 350-meter (1,150-foot)-high tower by Azrieli Group that Tel Aviv recently approved for construction and that is expected to be the second-tallest structure in Israel.

Or you can keep it small with an industrial warehouse, a single condominium or maybe a whole community, or put your investment dollars towards a self-storage facility.

Commercial real estate provides the security and stability of a long-term investment with steady cash flow.

Many properties have high occupancies that help provide a sense of diversification in rent revenue. The chances are low that all your tenants will decide to vacate at once, making this an attractive choice for investors looking for a predictable return on investment without major risk.

Commercial real estate also offers tax benefits. One such benefit involves depreciation, which allows investors to deduct part of their property’s values from annual income taxes over a set number of years.

Aside from that, unlike apartments and single-family rentals, it’s not uncommon for commercial tenants to sign multi-year or even decades-long rental agreements. This is how you achieve less turnover and can avoid the hassle of trying to locate another quality tenant.

Looking Ahead

The commercial real estate industry is growing by leaps and bounds, not only in Israel but all over the world. This trend is expected to continue as the property market should remain strong for the foreseeable future.

With an increasing number of foreign investors entering this market, along with more opportunities becoming available every day, expect a continued influx of investors looking for other profit opportunities besides the heart attack rise and fall of the stock market. 

About the Author
Bernard Brode is a nanotechnology product researcher and believes that it might end up being the biggest tech story of all time.
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