The Glut of Office Buildings Revisited

In the past I have written about the large amount of office buildings being built in Tel Aviv and its adjoining cities such as Ramat Gan, Givatayim, Bnei Brak, Petach Tikvah and Herzliya.  I asked the obvious question: whether or not it was wise to allow the construction of so many new office buildings and whether there would be enough businesses interested in populating all this new commercial office space.

I recently spoke to a very experienced real estate agent who deals only in commercial real estate.  He gave me a different angle on these questions.  In his opinion there will be a need for more office buildings in the near future.  He pointed out to me that, with the discovery of natural gas off the coast of Israel, many international companies will be setting up shop in Tel Aviv and along the coast.

In the past few years it has become apparent that commercial real estate was a good investment and many believe that it is more lucrative than residential property.  Commercial real estate can yield a profit of 7% to 8% a year while residential real estate can yield a profit of 3% to 3.5% a year.

If my friend is correct and there will be many international companies opening  up offices in Israel, where will the employees of these companies live?  Will they be foreigners? Will they be Israelis? Perhaps there will be a need for furnished apartments to rent.  If this is so then an investment in residential apartments which can be rented out fully equipped and furnished would be warranted.