Israel is an outstanding exporter of funds in everything related to real estate investments, according to a survey by the international company JLL. Related to investments in logistics complexes.
JLL specializes in real estate and investment management, and provides brokerage, project management, contracting, operations and asset management services to the world’s leading companies and Israeli clients. The company recently opened a Capital Markets department, which deals with buying, selling, financing and raising debt and capital, headed by Mor Ziv.
Moore Ziv, Director of Capital Markets at JLL / Photo: Roni Pearl
Institutional entities at the top of the list of investors
The department recently conducted a comprehensive study of investment patterns of institutional entities and private investors abroad and came up with surprising results: Israel is considered a global real estate investment powerhouse with multi-billion dollar investment volumes per year. In total, Israelis invested about $ 16.5 billion in real estate worldwide between the beginning of 2017 and the first quarter of the year. In terms of investments in the United States, Israel is in ninth place in the world, and in terms of investments in Europe, it is in 14th place.
“I recently returned from New York, and realized that we may be a very small country, but in the real estate investment world we are considered very significant,” says Ziv. In her estimation, this finding stems from two reasons: Israelis manage pensions and other savings and are looking for investment paths. In addition, the market here is small, limited and concentrated and it is difficult for investors to invest here at these levels. This leads them to look for avenues abroad.
Investors are divided into several types: institutional bodies, including pension funds and others; FAMILY OFFICE, ie private economic entities that are in the possession of capitalists who are looking for investment paths; and private investors. Ziv estimates that institutional investors make up about two-thirds of Israeli investments in real estate abroad.
“The data I think is even higher than what we found,” she says. “There are now pension funds that are connected to local players whose projects are registered in their names, so it is difficult to associate them with Israelis; it happens that Israeli investors set up a joint platform with local entrepreneurs, and here too the name of the latter appears, not the Israelis.”
Poland the only one left in Eastern Europe
Israel’s investments in global real estate are suffering from ups and downs related to the global situation. The year with the largest investment volume included in JLL’s study is 2007, in which Israelis invested $ 5.5 billion worldwide.
The sentiment of the companies that invested abroad at the time was also completely different from what we know today: Israeli real estate was in a decade-long crisis, while new markets winked at Israeli entrepreneurs, especially in Eastern Europe, and they preferred to initiate there. When the bubble burst towards the end of that decade – dreams of entrepreneurship also burst in the emerging Eastern European markets.
In 2007, Russia ranked second in Israeli investment after the United States, and the stories of the lavish mall Leviev established with Africa Israel in Moscow have filled the economic press. Investments have also been made in Romania (Bucharest also has a magnificent Leviev mall) and Hungary, but the only Eastern European country that has managed to maintain some kind of stability in Israeli investments is Poland, and probably not by chance – this country looks very solid in the former Eastern bloc.
In light of the abandonment of Eastern Europe, the volume of Israeli investments abroad decreased in the previous decade, and only in 2016-2017 did they cross the $ 4 billion threshold again. Since then, they have been on a downward trend. Onwards.
Almost a third of the investment – in the United States
The preferred destination for Israelis is the United States. Almost a third of Israeli investments go there. In second place in terms of investment targets is Germany, where Israelis invest about one-fifth of the world’s real estate investments, followed by Britain, which Israelis allocate about one-sixth of their global real estate investments.
Ziv talks about a change that has taken place in Israeli investors. While in the past Israelis talked about double-digit annual yields in percentages, which pushed them away to dangerous markets, today the situation is not like that. “On the one hand you want to hedge the risk and on the other hand not to see returns that are too low,” she says. “They have concentrated in recent years mainly on the safe US, Germany and UK, and have not gone to super dangerous countries.
“Beyond that, investors who buy a property no longer look at it as they once did, when they wanted 100% occupancy. Today they are content with 80% occupancy, so that it will be possible to market at higher prices in the future, and improve the properties and thus increase their returns.”
How can we explain the declines in investments abroad, even when the corona is behind us? Ziv says that there is a combination of stopping flights and travel, a changing strategy of the companies in their investments, and a limited supply of assets. Their.
The segments: logistics instead of offices
What do Israelis invest in? The answer to this is seemingly simple: in offices. Between 2017 and 2022, almost half of Israeli investments abroad were in offices, about 17% in housing and about 16% in commerce.
At the same time, Israeli investors are making a strategic change towards the logistics centers. In 2020, about $ 200 million was invested by Israelis in industrial and logistics complexes, compared to only $ 60 million invested in 2019; By 2021, the volume of investments in these complexes had already jumped to a quarter of a billion dollars, approaching the volume of investments in offices. In the first quarter of the year, the logistics sector was in first place in Israeli investments, before trading. Only $ 7 million was invested in offices in the first three months of the year.
Isn’t the Israeli market missing out on all the billions that fly from here?
“The options for pension funds to invest in a country are limited, there is not enough supply here. The big companies do not need their money, and they do not have too many options.”