Lawyer: Server Farms Are the New Avocado, Driving Real Estate Deals
Contrary to expectations that artificial intelligence would reduce office space demand, lawyer Amir Chen, managing partner and head of real estate at FBC & Co, observes a significant increase. Chen explained at the Globes Israel Real Estate Conference that AI companies themselves are expanding and require substantial office space, leading to a concentration of demand in prime locations like Tel Aviv's business districts. He highlighted the "Golden Strip" along Begin and Yigal Alon streets, noting major deals and upcoming projects.
Chen also pointed to the burgeoning defense-tech and server farm industries as key drivers of the real estate market. He likened the surge in server farm development to the "new avocado," where initial success leads to widespread adoption. Chen revealed that his firm is currently handling four data center deals, indicating a significant shift in the market. The demand for server farms has led the Israel Electricity Authority to temporarily freeze new connection approvals.
Regarding the residential real estate market, Chen noted a recovery in the last quarter, potentially influenced by upcoming elections. While fewer apartments are being sold, transactions are still occurring as people seek investment opportunities. He advised that patience, sufficient capital, and financing are crucial for navigating the current slowdown. Chen also observed the return of well-organized purchasing groups, which are proving successful.
Furthermore, Chen discussed the growing role of non-banking financing in real estate deals, noting a shift from mezzanine loans to senior debt. He also touched upon the long-term rental market, suggesting that the state should play a more active role in managing rental neighborhoods, including providing services like childcare and extracurricular activity coordination through digital platforms.
