Israel Commercial Real Estate: A 2025 Data-Driven Analysis

While headlines fixate on residential prices, a quiet divergence is reshaping Israeli commercial real estate. The data reveals a market decoupling, where office vacancies are rising in some areas while logistics and niche assets are quietly outperforming. This is the investor’s guide to navigating the numbers, not the noise.

The Market’s Core Metrics: Growth vs. Reality

The Israeli commercial real estate market is projected to grow from USD 19.21 billion in 2025 to USD 26.36 billion by 2030, marking a compound annual growth rate (CAGR) of 6.53%. This growth is anchored by Israel’s status as a global tech hub and its strategic geographical position. However, a closer look at the data shows a complex picture.

While sales transactions dominated the market in 2024, accounting for 74% of activity, the rental and leasing sector is forecast to grow at a faster rate through 2030. This suggests a potential shift in strategy for market participants. The office segment, traditionally the largest at 40% of the market, is facing headwinds from hybrid work models, leading to higher vacancies in some key business hubs. In contrast, the logistics and industrial sector is poised for significant expansion, with a forecasted CAGR of 6.73%, fueled by e-commerce and evolving supply chain needs.

Neighborhood Deep Dive: A Quantitative Comparison

Location dictates performance. An analysis of Israel’s core commercial hubs reveals significant disparities in pricing, yield, and demand drivers. The following table breaks down the key metrics for three distinct markets.

Mapping the Opportunity Zones

Israel’s commercial activity is heavily concentrated in its central and northern districts. The map below highlights the three key areas analyzed: the established financial and tech hub of Tel Aviv, the tech-centric zone of Herzliya Pituach, and the emerging redevelopment center in Downtown Haifa. Each represents a different strategic approach for a potential investor.

The Investor’s Calculation: Beyond the Purchase Price

A property’s sticker price is only the beginning of the calculation. Sophisticated investors must account for operational costs, which significantly impact net returns.

Understanding ‘Arnona’ (Municipal Tax)

Arnona is a municipal tax levied on property owners or renters, funding local services like waste management and infrastructure. Rates vary dramatically by municipality and property use. For commercial properties, Jerusalem often has the highest rates, with Tel Aviv, Ramat Gan, and Herzliya also charging premium rates. For example, commercial Arnona in Jerusalem can be around ₪298.5 per square meter annually, while in Tel Aviv it might be closer to ₪223.9 per square meter. This recurring expense is a critical variable in any cash flow projection.

Defining ‘Tashua’ (Yield)

Tashua, or yield, is a simple but powerful metric: it’s the annual rental income divided by the property’s total cost. A property purchased for ₪3,000,000 that generates ₪180,000 in annual rent has a `Tashua` of 6%. While residential yields in Israel often hover around 2.5% to 3.5%, commercial properties can offer more attractive returns. In Tel Aviv, office space rental yields can average around 4.3%, with retail slightly higher at 5%. Achieving these numbers, however, depends on maintaining high occupancy and managing costs effectively.

Who is Winning in This Market?

The current market favors specific buyer profiles with clear, data-informed strategies.

• The Logistics Investor: This investor capitalizes on the e-commerce boom and shifting global trade routes, focusing on warehouses and logistics centers. The forecast for this sector shows robust growth, particularly in Israel’s Central District.
• The Value-Add Redeveloper: This buyer targets older assets in gentrifying neighborhoods like Downtown Haifa. By investing in renovation and modernization, they aim to attract new tenants and benefit from rising property values driven by large-scale urban renewal.
• The SME Owner-Occupier: Small and medium-sized enterprises (SMEs) are increasingly purchasing their own space. This strategy provides stability against rising rents and allows them to build equity, turning a major expense into a long-term asset.

Too Long; Didn’t Read

• The Israeli commercial real estate market is forecast to grow to USD 26.36 billion by 2030, but performance varies widely by sector.
• The office market faces challenges from remote work, with rising vacancies in some areas, while the logistics sector is booming due to e-commerce.
• Tel Aviv commands the highest prices (₪45k-₪55k/m² in prime spots), while areas like Haifa offer lower entry points with potential upside from urban renewal.
• Key costs beyond purchase price include Arnona (municipal tax), which can be substantial and varies significantly by city.
• Commercial rental yields (Tashua) are generally higher than residential, with Tel Aviv offices averaging around 4.3%.