Office Market Reinvents Itself Amidst Caution, Says Ashtrom Properties CEO

The Israeli office market is navigating a more challenging and cautious environment, but Ashtrom Properties CEO Yaron Rokman remains optimistic about its future. Speaking at the Globes and Bank Leumi Real Estate Conference, Rokman described a dynamic market where some companies are downsizing or relocating, while others are expanding and filling the void.

Rokman highlighted a significant shift, noting that the annual pace of office construction in Israel has decreased by approximately 50% as of the first quarter, a trend he views as a sign of market maturity. He emphasized that the focus is shifting from simply leasing space to offering attractive work environments that accommodate hybrid work models. While acknowledging the impact of tech layoffs, Rokman stated that this is not the full story, citing examples of companies consolidating space but extending leases, or expanding their footprint despite overall market softness.

Ashtrom Properties is proceeding with new projects, including a 44,000-square-meter building in Rishon Lezion's Matam Alaf complex, which is expected to reach 80% occupancy shortly after the High Holidays. However, the company is adopting a more conservative approach in other locations, such as Bnei Brak, where it will not commence construction on a new tower without securing 40-50% pre-leasing.

Rokman identified defense-tech, AI, cyber, and medical companies as key drivers of new demand, contrasting this with the current weakness in some software firms. He also touched upon the potential for converting older office buildings, suggesting that in Israel, this will likely involve more planning adjustments than physical conversions. He concluded that while the market is currently difficult, it is constantly reinventing itself, and caution in development aligned with demand is key to its continued viability.