Gav-Yam Reports Double-Digit Growth in Operational Income Amid Strong Office Demand

Gav-Yam opened the real estate earnings season with an optimistic report despite ongoing uncertainties in the office market. The company highlighted sustained high demand for office spaces in key areas, attributing part of this growth to the expansion of AI-focused companies. In the second quarter, Gav-Yam's Net Operating Income (NOI) rose by 12% year-over-year to 208 million shekels, with the first half of the year totaling 410 million shekels. Funds From Operations (FFO) attributable to shareholders increased by 9% to 232 million shekels, while occupancy rates remained stable at approximately 97%.

Gav-Yam is currently developing six projects in high-demand areas, covering a combined 260,000 square meters with a total investment of around 3.6 billion shekels. These projects are expected to generate an additional 280 million shekels in annual revenue. Notably, in the flagship ToHa2 project in Tel Aviv, 75% of the space is either leased or under advanced negotiation. Similarly, the Matam East 3 project in Haifa has agreements or ongoing talks for all its spaces. Both projects are slated to become operational within the year and are expected to support revenue growth in the coming years.

During Q2, Gav-Yam signed 28 new leases in existing properties, achieving an average real rent increase of 4.8%. This indicates continued demand despite relatively high interest rates. Addressing concerns that technological advances might reduce office space demand, CEO Natali Mashaan-Zakai linked the trend to the growth of AI companies, which are driving strong demand for office and lab spaces both immediately and in the medium term. This outlook underpins the company's confidence in seven additional projects totaling 296,000 square meters, including a newly acquired project in the Terra complex in Tel Aviv, completed in Q2.