The Bank of Israel, concerned by surging housing prices, has called on the government, which controls about 93% of land in Israel, to free up more of it to meet demand.
The Israel Defense Forces headquarters, known as the Kirya, or campus in Hebrew, sits on 47 acres (19 hectares) in central Tel Aviv, complete with rooftop helicopter pad, a city landmark.
The sprawling Tel Hashomer base, where every conscript is inducted, is among a dozen other bases nearby taking up precious space in what are now swank residential and business districts.
In what will be one of Israel's biggest infrastructure projects, the Kirya will be slimmed down and the other compounds will be moved to new mega-bases, mostly in the south.
Tel Aviv's small seaside Sde Dov airport, used for military and domestic commercial flights, will also be removed by 2018 to free up land for thousands of apartments along the coast.
For the military, the migration offers benefits too, not least a $3 billion central intelligence campus, according to Lieutenant Colonel Peleg Zeevi, who is spearheading the tender process for the Defense Ministry.
In all about 30,000 soldiers, officers and their families will need to move to Beersheba and surrounding areas in the Negev desert, which makes up two-thirds of Israel's land.
Foreign firms approached to build facilities
Government investment in housing, cultural centers and infrastructure in the Beersheba region will inject some $1.6 billion a year into the local economy, Zeevi told Reuters.
The first installations to be built will be a $500 million training campus and a $400 million data center.
"This is an opportunity for the military to improve infrastructure, make organizational changes and in general become more efficient," Zeevi said. "We are talking about a data center 10 times bigger than any other built in Israel and logistics centers unlike any seen here before."
The ministry has been in contact with some of the world's biggest technology companies to enter into private-public partnerships to implement the projects over the next decade.
"We need a player that has the knowledge, ability and experience," Zeevi said.
Israel has already been approached by potential bidders, including IBM, CISCO and data storage equipment maker EMC Corp, an Israeli official said.
Citigroup and Morgan Stanley have shown interest in financing the projects, the official said.
Trusting a foreign firm with the country's top military secrets is a challenge, but one Israel says it can overcome.
"We are aware of the security issues that arise in deals with foreign firms, but because we want real competition and expertise, we will create conditions that will allow and encourage their participation," Zeevi said.