TEL AVIV, June 26 An expected increase in supply of prime office space in the Tel Aviv area in the first half of 2014 along with a migration of companies to peripheral areas will lead to a downward trend in occupancy rates, a survey in Israel forecast.
"Rental prices shall remain stable until there is a new and substantial supply on offer," estimated the semi-annual survey of office and industrial properties in several regions of Israel prepared by the Natam real estate group.
According to the survey of 37 Class A buildings in eight central areas of Tel Aviv and its suburb Ramat Gan, the average occupancy rate fell 0.3 percent to 96.85 percent in the winter of 2014 compared with the summer of 2013.
The average asking price in the same period rose 1.55 percent to 101 shekels ($29.43) per square meter.
The office market in most regions in the country is stable both in terms of occupancy rates and price levels, Natam said, although in a few areas a decline in occupancy rates, and consequently, in asking prices, was observed.
In the coming year, the office market in Tel Aviv will remain strong despite many office building starts in the city. The impact of the new buildings, if any, will be felt in 2015-2016.
"There is a current shortage of income-bearing assets for investors seeking returns of at least 8 percent," the report said. "Therefore, we are witnessing a shift towards investing in assets in the peripheral areas, as such riskier investments yield higher returns than investments in the central areas."
($1 = 3.4321 Israeli Shekels) (Reporting by Tova Cohen)