Are They Building Too Many Offices In Herzliya Pituach?

By: Snapir Erez

Sea View – the only one in Herzliya Pituach that will be completed in 2013.
As the manager of the business department at Anglo Saxon in Herzliya Pituach since 1996, many are the times that I have heard comments from my clients about the number of projects being built simultaneously in the area.

This is generally accompanied by the question: “Who will rent out all of these buildings?” and additional comments along the lines of: “Just wait, in another year or two, there will be a flood of space, buildings here will stand empty and prices will fall.”

As a marketing person, I am aware of market forces and of the basic principle supply that outpaces demand will lead to a decline in prices.  At the same time, I always choose not to rely on gut instincts alone, and instead to analyze the existing data on past construction volume against demand and try to divine from that what to expect in the next few years.

Construction in the Herzliya Pituach industrial area is limited by Urban Building Plan Her-1900, which applies within its boundaries, by ceilings that are approved in stages according to the progress of transportation solutions in the area.

About two years ago, after obtaining the professional opinion of the Ministry of Transportation, the District Planning and Building Council approved the transition to stage two in this Urban Building Plan area.  This stage allowed the issuance of building permits for a further 50,000 sq.m, which will increase the total space in the industrial zone to 575,000 sq.m.

It is noteworthy that these are principal areas, to which we must add about 35 percent for services areas that are permitted in the Urban Building Plan, thereby reaching the actual total space.  All of the spaces in this addition were quickly taken up to obtain building permits, mostly by the two projects currently being built on Hasadna’ot street: Sea Via (at the corner of Hamanofim street) and the Acro Canada Israel Center (at the corner of a Hahoshlim street).  These two projects are being built by a purchase group and will include a total of about 32,000 sq.m.

Building permits for beyond 575,000 sq.m. will be issued only after actual construction is begun on the Rav Mecher interchange, which will eventually connect Highway 5 and the Ayalon Highway with the industrial zone from Naomi Shemer Road, which was paved for this purpose about a year ago.  As customary in our district, there is still no estimated date for this project.

Notwithstanding the foregoing, the expected scope of building in Herzliya Pituach in the next three years is about 95,000 sq.m in 6 different projects, which have already received permits.  The largest of these, which includes about 30,000 sq.m., is being built on the oxygen plant site which, for many years, was a serious safety hazard and was evacuated under pressure and encouragement from the municipality in exchange for the granting of larger than usual construction rights.

An analysis of demand finds that, on average over the past decade, about 40,000 sq.m. of new office space is rented out each year.  In the past three years, there has been a decline in demand, mainly on the part of hi-tech companies, and the yearly average has been about 30,000 sq.m. of new office space.

Based on the current high occupancy rate in Herzliya Pituach (96%) and on demand data and construction completion dates for these projects, we expect the following scenario:  In 2013, when only construction on the Sea View project, totaling 14,000 sq.m. will be completed, and in light of the fact that some of the purchase group’s companies have purchased the offices for their own use, expectations in the area are for a balance between supply and demand, or for a surplus of demand that will enable an increase in prices.  It is worth noting that prices in Herzliya Pituach have been relatively low in the past five years compared to Tel Aviv and other cities where there has been an increase over the same time.

In 2014 and 2015, on the assumption that the five projects will actually be completed during these years, the supply of available office space will be a challenge for developers and a market situation that will favor tenant companies.  It is still early to project demand during these years, but we can say that if it is not lower than the average of previous years, this impressive level of supply will also be marketed within the next three years.

The writer is a partner and director of business sales at Anglo Saxon Herzliya Pituach.

Category : News and Articles

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