The turmoil in Israel’s high-tech sector is no longer confined to tech company corridors. It is now spreading into the commercial real estate market. After years in which technology firms were the main engine of demand for office space in Israel, pushing rents to record highs, the market is beginning to reassess itself. Layoffs, slower hiring and the adoption of artificial intelligence tools that reduce the need for large workspaces are forcing companies to rethink how much office space they really need.
Yaniv Lotringer, CEO of JLL Israel, the local branch of the international real estate giant, said the impact is not always immediate, mainly because many companies are locked into long-term leases. Still, he said, many firms are already looking for aggressive ways to cut costs.
“Companies have become much more sensitive to real estate costs, to how much space they really need and how to use it correctly,” Lotringer said. In some cases, companies are trying to offer space for sublease. In others, they are effectively shutting down parts of their offices, closing a floor or a section of the workplace in order to reduce electricity and operating costs, even while remaining bound by the original lease.
Lotringer said the impact is uneven. In central Tel Aviv, the change is more moderate because demand for high-quality Class A office space remains, and companies still want to stay close to the business ecosystem.
Outside Tel Aviv, however, the picture is darker. “In Petah Tikva, Ra’anana, Herzliya and Bnei Brak, it is no longer what it was,” he said. “You see vacant spaces, spaces that cannot find a solution, and prices that are falling.”
According to Lotringer, the trend is growing stronger. One result is an accelerated shift toward flexible workspaces, which allow companies to adjust their office footprint to changing needs without long-term commitments.
Yaniv LotringerPhoto: Amir LeviWhile the office market is already feeling the high-tech downturn, the picture in the private housing market is more complex, with concerns focused mainly on what may happen next.
For years, high-tech workers, who enjoyed high salaries, large bonuses and stock options, were a major driver of demand for luxury apartments and new projects in central Israel. That helped fuel price increases in areas such as Tel Aviv, Ramat Gan, Givatayim, Herzliya and Ramat Hasharon, where a significant share of buyers and renters came from the sector.
Now, as the industry enters a period of stagnation, the question is how stable the housing market in high-demand areas really is. Real estate professionals stress that, at least for now, it is too early to speak of dramatic price declines in residential real estate. The initial effect appears to be a slowdown in transactions and the postponement of purchases.
“Layoffs in the high-tech sector could certainly affect the housing market, especially in high-demand areas,” said real estate appraiser Ohad Danos, former chairman of the Real Estate Appraisers Association. “But despite the concern, it is important to be careful about drawing overly dramatic conclusions.”
Danos said most laid-off workers are not forced to sell their homes immediately. “Many have savings, severance pay and additional assets, so the main effect is on future purchases that are delayed or canceled, not on a sharp increase in the supply of apartments for sale,” he said.
He added that even if some high-tech workers temporarily leave the market, Israel’s housing supply remains limited, and contractors will struggle to cut prices because of high financing and construction costs. “In many cases, they will prefer to offer benefits and financing campaigns rather than sharp price reductions,” Danos said.
He said today’s market is very different from the boom years. “The market today is driven less by optimism and expectations of capital gains, and more by real housing needs,” he said. “Home upgraders, young couples and families are gradually returning to the market.”
Choosing to wait
Maor Duek, CEO of the non-banking finance company Menif Financial Services, said high-tech layoffs can affect real estate. Still, demand is shaped by several factors, not only economic ones. “Alongside interest rates and unemployment, there is also a significant impact from the national mood and the public’s sense of security,” he said. “During a period of war and uncertainty, even people who are financially able to buy an apartment sometimes prefer to wait. It is difficult to commit to a long-term mortgage when there is personal and national uncertainty.”
Duek said the two main variables currently affecting the housing market are interest rates and unemployment. “The lower the interest rate and the stronger the labor market, the greater the incentive to buy an apartment,” he said.
Maor DuekPhoto: PRHe said it is still too early to determine that high-tech layoffs will lead to price declines. Israel’s labor market remains relatively strong, and many workers who leave high-tech jobs manage to find new positions within a relatively short period. In addition, expectations of future interest rate cuts are already improving market sentiment and encouraging some buyers to reexamine deals.
Galit Vinder Tepper, CEO of Phoenix Construction Financing, noted that the real estate market had already slowed before the current high-tech crisis. “This is a combination of factors: a prolonged high-interest-rate environment, economic uncertainty and some buyers waiting for developments,” she said.
She said the impact of high-tech layoffs may be felt more strongly in central high-demand areas, where many buyers work in the sector. In other areas, the effect is likely to be more limited. “It is too early to assess that the high-tech layoff wave, by itself, is materially changing demand levels or the price trend,” she said.
Despite the state of the high-tech sector and the prolonged stagnation in the real estate market, transactions involving tech workers are still taking place.
Idan Yaskolka, owner of the Apollo Group, which markets new and secondhand apartments, said several significant deals were recently completed in north Tel Aviv and Ramat Aviv, some by buyers from the high-tech sector. Among them was a five-room apartment on Borla Street in the veteran Lamed neighborhood, sold for about 5.68 million shekels (about $2 million) to a high-tech couple. Another apartment in the Nofei Yam neighborhood was sold for about 5.1 million shekels, also to buyers from the sector. According to Yaskolka, buyers with equity and job stability are still looking for opportunities.
One hope in the real estate market is that uncertainty and high prices in central Israel will push investors and homebuyers toward the periphery. Geshem Holdings reported that its Shorashim project in Kiryat Ata sold about 35% of its apartments within 48 hours, even before public marketing began.
The company’s vice president of marketing said that against the backdrop of uncertainty in central Israel, many buyers are looking for opportunities at lower prices in the periphery. “The combination of location, planning and a developing neighborhood continues to attract families, young couples and home upgraders,” he said.
Michal GurPhoto: Lilach RazMichal Gur, CEO of Peretz Bonei Hanegev Group, said the large-scale layoffs are not expected to affect demand for apartments in the second and third rings around Tel Aviv, including Lod, Rehovot, Ashdod, Ashkelon and Be'er Sheba. These areas, she said, are not major hubs for the high-tech community, and apartment prices there range from 1.5 million to 3 million shekels.
“We focus from the outset on building apartments in these cities that middle-class buyers can realistically afford,” she said. “In recent weeks, we have seen no shift in the trend. On the contrary, sales have remained steady, and following the latest interest rate cut, we are even beginning to see signs of a slight recovery.”