A Gluttony of New Office Buildings May Cause a Crisis in the Commercial Property Market

Crane with grey borderThe Globes newspaper recently reported that approximately 900,000 sq. meters of office space is slated for construction by 2018.  The assumption, however, is that many of these office buildings will never be built.

For example, the Azrielli Group, which purchased the Kupat Cholim Clalit project in Tel Aviv, (which includes the rights to build a tower with thousands of sq. meters of office space), will not be building these offices until they first sell the office space in other towers currently under construction by them.

In actuality, there is currently 433,000 sq. meters of office space under construction. It is for this reason that the investment house Excellence has declared that a large crisis in the market of this type of commercial real estate is looming.

The analyst Dr. Amir Arad has come to the conclusion, after checking the portfolios of major construction companies, that too many office buildings are being constructed, especially in the center of the country and Tel Aviv.  In addition to this, many customers prefer to forego the fancy office building in favor of lower priced middle of the road office buildings. The slowing down of the economy and the influx of new office buildings into the market has caused a decrease in the prices of these properties.

Those wishing to invest in commercial real estate may wish to consider waiting for a further lowering of prices before investing.