Even Ruti Broudo chose Rishon LeZion: How Tel Aviv is eroding its growth engine
In recent years, more and more Israelis prefer to spend their leisure time and shop near home instead of traveling to Tel Aviv — both because the offerings are no longer unique or interesting enough, and because of the traffic chaos. If the municipality does not wake up, the day is not far off when the 'city that never stops' will take a long break.
Where is the retail and marketing industry heading? What are the new trends that will characterize it, and what trends are expected to disappear? Who are the players that will survive the rapid pace of change? This column will analyze the situation in the industry and the future that awaits it. For inquiries and comments: tamir@c-bs.co.il
Tel Aviv has always liked to think of itself as the center of the world, or at least as the metropolis that dictates Israel's economic pace. However, in the retail market, the data on the ground tells a completely different story: the city's commercial growth engine is eroding.
Customers are no longer coming into Tel Aviv to shop, the "neighbors" prefer to stay and shop near home, and the traffic chaos is defeating what remains. If the city's leaders do not wake up now, Tel Aviv will turn from a "city that never stops" to a "city on break" when it comes to commerce.
Empty commercial spaces
To understand the magnitude of the change, one must look back. About a decade ago, the market picture was clear: Tel Aviv was the undisputed commercial "magnet" of Israel. The monthly purchasing power of households in the city stood at about 943 million shekels, with another 28 million shekels generated by workers in the city in the food service sector.
But the real story was not the residents, but the purchasing power that came from outside: every month, about 500 million shekels flowed into Tel Aviv's commercial spaces. Households in neighboring cities injected about 300 million shekels, workers and their visitors added about 55 million shekels, tourists contributed about 40 million shekels, and visitors and travelers from all over the country added another 110 million shekels. On the other hand, about 390 million shekels per month leaked out of Tel Aviv, mainly to food chains outside the city.
In those days, about 748,000 square meters of gross retail space were operating, generating a monthly revenue of about 1.1 billion shekels. High levels of activity were recorded on the main streets and in the leading malls, and monthly rent exceeded the threshold of 250 shekels per square meter. Tel Aviv was not just a place of residence and a center of employment and culture; it functioned as the country's "department store" and national "dining room."
From 2017 to 2024, about 320,000 more square meters of commercial space were built in Tel Aviv. The nature of this construction was different: almost no new shopping centers, but mainly street-front retail in urban renewal and mixed-use projects. Today, about a million square meters of commercial space operate in the city, at a ratio of about 4.5 square meters per household. This is a higher ratio than the national average (3-3.25 square meters), and the result is a relatively large supply of empty commercial spaces.
The neighbors are not coming
Tel Aviv residents consume most of their needs in their city and a little in the city's neighbors, mainly in places like Big Glilot, Ayalon Mall, and the commercial areas on Lehi Street in Bnei Brak. The neighbors generate demand for some of the sub-markets in Tel Aviv, but at decreasing rates.
Regarding the food industry, there is a shortage of supermarket space in Tel Aviv, especially "discount" stores. But if in the past 50% of the purchasing power of Tel Aviv residents in this field leaked out of the city, today it is only about 20%. Most are forced to buy close to home (excluding Wolt). Neighbors only shop in Tel Aviv at delis and special markets, where the supply of food stores is relatively small.
We mentioned earlier that Tel Aviv served as Israel's "dining room," when about 60% of the revenue came from customers who were not Tel Aviv residents. Today, the entry rate has dropped to about 30% at most, with traffic mainly heading to Nahalat Binyamin, Florentin, the Mesila, and the Carmel and Levinsky markets.
And what about the fashion sector? In the past, about 60% of the purchasing power in Tel Aviv came from outside, while today this rate has shrunk to only about 30%. Customers enter Tel Aviv mainly for the Ramat Aviv Mall, and a little for "special" stores in the city center.
In non-food products, monthly purchasing power leaks mainly to unique home products and online. It enters Tel Aviv in smaller and smaller rates — from a 40% contribution to revenue a decade ago to about 20% now — mainly to the East Fair (Yarid HaMizrach) and to Herzl Street, which is declining.
What caused and is causing this change is a combination of several parallel processes. First, the neighboring cities already have everything, and their residents have no reason to suffer in traffic jams in the city. All international fashion chains, home brands, delis, and leading culinary brands have opened in the mall and/or commercial center near home.
Brands that were previously identified exclusively with Tel Aviv are being replicated in the cities surrounding it, and even Ruti Broudo chose to reopen the legendary "Coffee Bar" brand specifically in Rishon LeZion, along with her other brands.
Traffic chaos and the lack of parking spaces are a significant factor: Tel Aviv has become a city that is difficult, if not impossible, to reach and move within. Huge traffic jams at the entrances, infrastructure works and endless excavations, and a declared municipal policy of reducing parking supply for guests. Anyone who does find a parking space is required to pay 100 shekels or more just for the right to park for a short visit. In the cost-benefit balance, many give up. The lack of foreign tourism has also reduced a significant portion of the revenue.
The Tel Aviv magnet survives only in a few locations — Ramat Aviv Mall remains the only luxury mall in Israel where about two-thirds of the purchasing power still comes from outside Tel Aviv. The Center (Dizengoff Center), which was always branded as a different and special center, benefits less from the entry of purchasing power from outside the city and has become more "Tel Avivian."
On the streets — only Shenkin, Shabazi, and parts of Dizengoff constitute a special magnet. Most commercial streets in Tel Aviv are light-years away from the standards of European capitals. In Milan, Vienna, or Munich, monthly rents of 500 euros per square meter are recorded, and in Paris and London even over 1,000 euros — 10 times or more than in Tel Aviv.
Like managing a mall
Tel Aviv cannot continue to rely on the law of gravity of the past. Reality has proven that there are excellent alternatives outside the city. If the municipality does not wake up, it will find itself with dying commercial streets and empty spaces in the heart of mixed-use projects.
To deal with the situation, comprehensive and controlled strategic-economic plans are required. In particular, there is a need for strategic planning for the urban trade system, which must stop being a "byproduct" of real estate projects and/or ground floors forced upon developers.
It is necessary to manage the deployment of commercial spaces with a broad urban vision and to establish management companies for commercial streets (BID). Just as a mall is managed by a management company that ensures the mix, cleanliness, security, appearance, and marketing, so must the commercial streets and central hubs in the city be managed — for example, HaTachana, the markets, and the ports of Jaffa and Tel Aviv.
If the municipality wants to bring in purchasing power from outside, it must create dedicated parking and transport solutions for visitors and soften the traffic chaos. A visitor who is required to pay 100 shekels for parking for 2-3 hours of fashion shopping or a meal at a restaurant will simply not return.
It is also necessary to create experiential, branding, and product differentiation — since the leading chains are everywhere, Tel Aviv must encourage and incentivize independent trade, local designers, and unique culinary offerings that cannot be replicated in the new Big in Petah Tikva, in Ness Ziona, or in Ashdod.
Bottom line, Tel Aviv must understand that "Dizengoffing" is no longer a need, it is a choice. If the experience is not accessible, managed, and unique, customers will continue to vote with their feet, and the money will go to the neighbors.
