Sela and Menivim REITs Shift Focus Amid Office Market Challenges

Sela Real Estate and Menivim REIT have improved their financial performance despite ongoing difficulties in the office property market, and are increasing exposure to other sectors such as retail, industrial, and logistics. Sela acquired the Kfar Saba Green Mall in early April, which added 9 million shekels to its second-quarter net operating income (NOI) and is expected to contribute 40.5 million shekels annually at full occupancy. Menivim expanded its industrial and logistics holdings by purchasing additional rights in existing assets and acquiring a 51% stake in Sheniv’s industrial and logistics spaces for 56 million shekels in late March, totaling 192 million shekels in acquisitions this year.

Despite these moves, the stock market has not yet responded positively, with Menivim’s shares down 13.1% and Sela’s down 23.6% since the start of the year, compared to a 6.3% decline in the TA Real Estate Index. Sela reported a 7% increase in NOI to 94 million shekels and a 5% rise in funds from operations (FFO) to 64 million shekels in Q2 2026. Menivim saw a 12% NOI increase to 67 million shekels and a 15% FFO jump to 49 million shekels, mainly driven by new assets.

Both companies face challenges in the office sector, which remains highly competitive with limited demand due to geopolitical and security uncertainties. Menivim’s office exposure is 40% of its NOI, lower than Sela’s 52%, and it holds less than 10% of office space leased to tech firms, compared to 20% for Sela. Menivim is awaiting delivery of 12,000 square meters of office space in Tel Aviv’s Levanda Tower by year-end but has struggled to lease it, especially after a major tenant, Moon Active, announced its departure in June, adding 26,500 square meters of vacant office space nearby.

Sela’s difficulties are more pronounced, notably with the Bank Leumi headquarters in Tel Aviv, acquired in 2022 for 650 million shekels. The 13,400-square-meter building was vacant upon transfer in February 2024, and leasing has only recently gained momentum, reaching 52% occupancy by June 2026. Additionally, Sela lost 3 million shekels in quarterly income after Bank Mizrahi-Tefahot vacated office space in the Moshe Aviv building in April, which remains unleased.

Both REITs are actively diversifying to offset office market headwinds, focusing on retail, industrial, and logistics properties to strengthen growth engines amid ongoing market uncertainty.