Israel's Commercial Real Estate Faces Major Shifts Amid New Tower Boom

A massive wave of corporate relocations is reshaping Israel's commercial real estate market, as companies abandon older office buildings in favor of ultra-modern, high-rise towers in Tel Aviv, Givatayim, and surrounding cities. Projects like TOHA 2, BEYOND, and the Harugei HaSetarim complex are reaching completion, offering advanced amenities and better public transit access, but leaving substantial vacancy "holes" in legacy properties.

The Musical Chairs of Commercial Real Estate

Among the most notable moves, tech giant Google has leased approximately 60,000 square meters in the TOHA 2 tower in Tel Aviv, developed by Amot and Gav-Yam. As a result, Google is set to vacate nine floors at the nearby Ampa Building on Yigal Alon Street. Industry sources indicate these departing spaces may be absorbed by existing tenants like the law firms Agmon with Tulchinsky and Goldfarb Gross Seligman, though whether they can fill the entire footprint remains uncertain.

Similarly, cybersecurity firms Armis and Fireblocks have relocated from the Acro Tower on Yitzhak Sadeh Street to the newly developed Harugei HaSetarim complex. Armis leased roughly 8,000 square meters and Fireblocks about 13,000 square meters through Switchup by Fattal. Meanwhile, the prominent law firm Meitar is moving its operations from 13 floors at Beit Orid in Ramat Gan to 17 floors spanning some 30,000 square meters in the BEYOND tower in Givatayim, leaving behind a major anchor vacancy without an immediate replacement.

Challenges for Aging Office Buildings

Guy Amosi, CEO of Avison Young Israel, describes the current market dynamic as a "musical chairs game." According to Amosi, the office market is splitting into two distinct tiers: prime new towers that continue to attract robust tenant demand, and older, legacy buildings struggling to backfill massive spaces left behind by departing anchors.

This trend extends well beyond central Tel Aviv. Mizrahi Tefahot Bank vacated roughly 12,700 square meters across eight floors in Moshe Aviv Tower in Ramat Gan, relocating its headquarters to a newly established facility in Lod. According to financial reports from property owner Sela Capital Real Estate, no replacement tenant has been secured, and occupancy in the Moshe Aviv Tower is projected to plummet to 50% by 2027.

Future Supply and Adaptation Challenges

Additional shifts include AudioCodes leaving Airport City for the Naeim Park near Mesubim junction, and health funds Leumit and Meuhedet purchasing massive spaces in Rishon LeZion to relocate their central offices from Tel Aviv. According to data from Colliers Israel, the market faces a massive influx of new inventory over the next five years, including approximately 1.64 million square meters of office space in Tel Aviv, 681,000 square meters in Petah Tikva, 455,000 square meters in Herzliya, and 350,000 square meters in Bnei Brak.

"The challenge in coming years won't necessarily be leasing out the new towers, but rather backfilling the previous generation of buildings," notes Guy Amosi, CEO of Avison Young Israel.

TZachi Agassi, founder of 770 Offices in Tel Aviv, echoes this sentiment, emphasizing that older spaces must be re-engineered to match the operational needs of modern technology firms, which demand higher spatial flexibility, collaborative areas, and diverse meeting room configurations compared to traditional legal or financial layouts.