Leading Israeli Real Estate Firms Propose Payment Relief to Boost Office Sector

Several leading Israeli commercial real estate companies have formed a forum under the Association of Public Companies to address the financial challenges facing the office sector. The forum, led by Tzachi David, VP of Business Development at Mivne Group and former deputy budget director for real estate at the Finance Ministry, has approached various government ministries and agencies requesting a reconsideration of payments related to land, taxes, and associated levies. Their goal is to stimulate billions of shekels in new investments and revitalize the sector, which has been hit hard by rising interest rates and the worsening tech industry crisis.

The office real estate market peaked in 2023 with over one million square meters of new construction but has since sharply declined, with only 53,128 square meters started in Q1 2026, the lowest in 17 years. The forum seeks to shift some government focus from residential real estate, which has received most regulatory relief, to commercial properties now facing significant difficulties.

The companies propose four key relief measures: allowing partial purchase of land rights based on planned construction permits rather than full rights acquisition, changing the interest and linkage mechanism so that land payments do not accrue interest if the Israel Land Authority (ILA) does not complete transactions within three months, reducing the combined metro tax and lease fees from over 100% to a maximum of 91% of land value, and authorizing ILA regional managers to approve building permits against bank guarantees to speed approvals.

David emphasized that current regulations were designed for a rising market nearly 15 years ago and that updating them to reflect today’s high inflation and interest rates would enable more construction without costing the state. The proposals cover the entire commercial real estate sector but are especially critical for office projects. The forum now awaits government review from the Finance Ministry, ILA, Interior Ministry, and Housing Ministry to determine implementation feasibility.