Market Intelligence

Legal Framework

Commercial property in Israel can be held under two structures: freehold (tabu) — full ownership registered in the Israel Land Registry — and leasehold from the Israel Land Authority (Minhal), which is the more common structure for industrial and logistics assets. Leasehold properties require lease renewals (typically every 49 years) and have specific transfer restrictions. Always verify the ownership structure before proceeding.

6-Step Transaction Process

Step 1: Property Identification. AI-scored shortlist from Agada based on your criteria. Step 2: Site Visit and Technical Assessment. Physical inspection, engineering review, utility verification. Step 3: Due Diligence. Legal title search, building permit verification (teudat gmar), zoning confirmation (taba), environmental clearance. Step 4: Heads of Terms / LOI. Non-binding letter of intent setting key commercial terms. Step 5: Sale Agreement. Binding purchase contract drafted by Israeli property lawyer. Step 6: Closing and Land Registry. Payment, tax clearance, transfer registration.

Costs to Budget

• Purchase Tax (Mas Rechisha): 8% for foreign buyers, payable within 60 days of signing
• VAT: 17% on commercial transactions (recoverable if you register a VAT-registered Israeli entity)
• Lawyer Fees: 1–1.5% + VAT
• Agent Fee: 2% + VAT (paid by buyer in Israeli commercial transactions)
• Land Registry Fee: Approximately ₪3,000–10,000 fixed
• Arnona (Municipal Tax): Annual tax based on property size — typically passed to tenant under NNN lease

Financing for Foreign Buyers

Israeli banks offer commercial mortgages to foreign buyers at up to 50% LTV. Required documents: passport, proof of funds, business registration, credit history from home country. NIS-denominated mortgages at 5.5–7.5% (floating or fixed, 5–20 year terms). USD/EUR financing possible through international lenders with Israeli programs.

Currency Dynamics

The NIS has appreciated significantly over the past decade and is one of the world's most stable emerging-market currencies, backed by Israel's strong current account surplus, foreign currency reserves, and tech export income. Forward hedging is available through Israeli banks for investors seeking to lock in exchange rates.

Nesher Industrial Zone (Haifa District)

Adjacent to Haifa's urban core, Nesher hosts mid-sized industrial and manufacturing tenants. Recent infrastructure improvements, including upgraded road connections and fiber connectivity, have attracted tech-industrial tenants. Current asking rents: ₪35–48/sqm/month. Strong institutional landlord base; low vacancy.

Caesarea Industrial Park

Israel's most prestigious industrial park, managed by Caesarea Development Corporation. Hosts global and Israeli blue-chip tenants — Intel, ISCAR, Teva. Grade-A facilities, 24/7 security, advanced infrastructure, direct access to Route 2 (Tel Aviv–Haifa highway). Logistics and high-tech industrial asking rents: ₪42–60/sqm/month. Low availability; strong long-term leases.

Ashdod Industrial Zones

Three major industrial zones adjacent to Ashdod Port make this Israel's premier logistics and import-export hub. Zone A (heavy industrial), Zone B (light industrial and logistics), and the newer Northern Zone (logistics and distribution). Current logistics rents: ₪28–40/sqm/month. High infrastructure capacity — 1,000+ kVA power available at key sites, direct port access.

Rehovot Science Park

Adjacent to the Weizmann Institute and Hebrew University Rehovot Campus, this zone attracts life sciences, pharma, and medical device companies. Hybrid R&D/industrial facilities command ₪55–75/sqm/month. Tenants include global pharma companies and Israeli biotech startups. Long-term lease demand is strong from well-capitalized tenants.

Petah Tikva Industrial Areas

Israel's largest industrial employment zone by number of businesses. Highly varied — ranging from 50-year-old light industrial buildings to modern logistics facilities. Broad zoning flexibility. Asking rents: ₪30–50/sqm/month depending on asset quality. High liquidity — largest transaction volume of any Israeli industrial zone.

Mistake 1: Not accounting for purchase tax in the acquisition cost. At 8% of the purchase price, purchase tax is a significant cost that many international investors fail to build into their return models. On a ₪20M acquisition, that's ₪1.6M that must be funded at closing. Budget it from day one, or your yield calculations will be materially wrong.

Mistake 2: Underestimating renovation and fit-out costs. Israeli industrial buildings often require meaningful capital expenditure to bring them to institutional standard — roof replacements, electrical upgrades, fire suppression systems. Israeli construction costs are high by regional standards: ₪4,000–8,000/sqm for industrial fit-out. Get an engineering assessment before finalizing your price.

Mistake 3: Ignoring arnona in yield calculations. Arnona (municipal property tax) is a significant ongoing cost, typically ₪15–60/sqm/year depending on property type and municipality. Under NNN leases, tenants pay arnona directly — but verify this in the lease. Gross leases with landlord arnona responsibility can materially reduce net yield.

Mistake 4: Not verifying building permits and usage rights. Israeli construction regulations have changed significantly over decades. Many industrial buildings have been modified or extended without proper permits (taba). An unpermitted structure can be subject to demolition orders, fines, or restrictions on use. Your Israeli lawyer must conduct a full permit search — this is non-negotiable due diligence.

Mistake 5: Working with generalist brokers who lack CRE specialization. Israeli real estate brokerage is dominated by residential agents who occasionally dabble in commercial transactions. Commercial real estate requires specialized knowledge of industrial zoning, lease structures, cap rate analysis, and building technical specifications. Work only with specialists — the cost of a naive commercial transaction far exceeds any broker fee savings.

Cap Rate Comparison

Israeli logistics assets: 5.5–7% cap rates. Israeli residential: 2.5–4% gross yield (much lower net). Israeli retail (prime): 6.5–8%. Israeli office: 5.5–7.5%. Logistics offers comparable or superior yields with significantly lower management intensity, given NNN lease structures and institutional tenant quality.

Tenant Quality

Logistics tenants — national retailers, 3PL operators, e-commerce fulfillment providers — are typically far larger and more creditworthy than residential tenants. Lease terms of 5–15 years are standard, providing income visibility and significantly lower vacancy risk than residential portfolios.

Lease Structure Advantages

NNN (triple-net) leases transfer all operating costs — arnona, maintenance, insurance — to the tenant. The landlord receives clean NOI with minimal management burden. This structure is standard in Israeli logistics and industrial real estate, making it highly attractive for international investors seeking passive income.

Future Outlook

With Israel's e-commerce market still at approximately 14% of total retail (vs. 25–30% in leading markets), the structural demand tailwind has years to run. We forecast Israeli logistics rents to grow 8–12% per annum through 2028, driven by continued vacancy compression and the growing share of online retail.

Legal Due Diligence

• Title search — confirm ownership and absence of encumbrances (Land Registry extract)
• Ownership structure — freehold (tabu) or leasehold (Minhal); if leasehold, confirm remaining term and renewal rights
• Building permits — confirm all construction has valid occupancy permits (teudat gmar)
• Usage rights — confirm permitted use under current zoning matches your intended use
• Liens and mortgages — verify full discharge before closing
• Lease review — if tenanted, review all lease agreements, options, and side letters

Technical / Structural Due Diligence

• Structural engineering inspection — roof, load-bearing elements, floor loading capacity
• Electrical — confirmed power capacity, transformer condition, three-phase availability
• Fire suppression — sprinkler system, fire doors, compliance with Israeli fire code (2018 standard)
• Plumbing and drainage — industrial drainage compliance, hazardous waste containment if applicable
• HVAC and ventilation — condition and capacity relative to use

Financial Due Diligence

• Verified NOI — 12 months of actual rent receipts and operating expense documentation
• Cap rate calculation — verified NOI / purchase price; compare to current market comparables
• Arnona — confirm rate, who pays, historical payment record
• Capex reserve — identify deferred maintenance and required near-term capital expenditure

Environmental Due Diligence

• Phase 1 Environmental Site Assessment — historical use review, neighboring activities
• Soil contamination — if prior industrial use, Phase 2 may be required
• Asbestos survey — mandatory for buildings constructed before 2000

Lease Term and Options

Israeli commercial leases are typically structured as a base term plus options. A common structure is a 5-year base lease with two 5-year renewal options, giving tenants security and landlords predictable income. Options are typically at fixed rents or CPI-indexed rents, with caps on CPI adjustments commonly negotiated.

NNN vs. Gross Leases

Industrial and logistics assets almost universally use NNN (triple-net) structures: tenant pays rent, arnona, building insurance, and routine maintenance. Commercial retail leases are more varied — some include service charges for common area maintenance (Israeli equivalent of service charge). Always verify exactly what the lease rent covers before comparing properties.

Rent Indexation

Most Israeli commercial leases index rent to the Israeli Consumer Price Index (CPI) annually. In periods of higher inflation (2022–2024 saw 5%+ CPI), this created meaningful rent growth for landlords. Some modern leases cap annual CPI increases at 3–4% or allow fixed step-rents as an alternative.

Key Negotiation Points

• Rent-free period: 1–3 months standard for new industrial leases (fit-out period)
• Capex contribution from landlord: negotiate for HVAC, racking, office fit-out for longer commitments
• Break clause: rare in Israeli industrial leases but increasingly available for 10+ year terms
• Subletting and assignment rights: Israeli landlords often restrict these; negotiate carefully