Industrial Land Prices in Israel’s Periphery Soar Sixfold, Undermining Incentives
A new study by the Economics Department of the Manufacturers Association of Israel reveals that industrial land prices in peripheral areas designated as National Priority A zones have surged nearly sixfold over the past nine years. The average price per square meter rose from 219 shekels in 2017 to 1,252 shekels in 2026. This dramatic increase has effectively eroded the government’s land price discount policy intended to attract factories to these regions.
Under the current policy, factories in National Priority A areas are entitled to pay only 31% of the land’s value, receiving a nominal 69% discount. However, this discount applies only to the first 400 shekels per square meter of land value, with full price paid beyond that threshold. Since the discount cap of 276 shekels per square meter has not been updated since 2016 and is not linked to inflation, rising land prices have diminished the real benefit. The discount rate has dropped from 64% to 24% as prices increased by about 22% annually.
The study analyzed 82 land appraisals from Israel Lands Authority tenders between 2017 and July 2026, finding price increases across regions: approximately 23.6% per year in the South and 11.8% in the North, where prices are nearly double those in the South. By 2026, all examined land parcels exceeded the discount cap, meaning factories now pay the full price for most of the land cost.
For example, a factory purchasing a 10-dunam (10,000 square meter) plot in 2026 would face a full land value of about 12.5 million shekels. With the capped discount, it pays roughly 9.8 million shekels, whereas a full 69% discount on the entire price would have reduced the cost to about 3.9 million shekels. This creates a gap of nearly 5.9 million shekels per factory, increasing upfront capital and financing costs, especially burdening small and medium enterprises with limited equity.
Abraham Novogratzky, President of the Manufacturers Association, commented that the discount cap’s stagnation has significantly reduced the cost advantage of peripheral locations compared to central Israel, weakening incentives to establish factories there. He urged the Israel Lands Authority council to remove the discount cap immediately, noting that no legislative changes are required to do so.
