Is the Tech Sector Crisis Good for the Housing Market?

The reduction of the workforce in the high-tech industry, together with an excess of millions of square meters of office space, is an opportunity to convert part of the planned office space into hundreds of thousands of apartments. In the end, what the real estate market needs is a greater supply of small apartments in the central area, not magic solutions. But because of the distortion in property tax payments, the reality is that municipalities prefer businesses to residents.

It is no secret that even without the crisis in the tech sector, there is an excess of millions of square meters of offices in the market, a direct result not of market needs but of the distortion in the property tax system. Municipalities and local authorities receive 3 times more property tax from businesses than from residences, which naturally leads them to prioritize promoting real estate plans for offices over residences. (Will any politician dare to propose lowering the property tax for businesses and raising the property tax for residences? Unlikely.)

In my opinion, the current crisis is a golden opportunity to convert at least part of the planned office space, which as mentioned totals millions of square meters, into tens of thousands of apartments, with an emphasis on small and compact apartments.

A clear example of this is the Exchange (Bursa) complex in Ramat Gan, which is a distinct office area. Student apartments were recently prepared there, but in its current form it will remain a distinct area of offices and business. Promoting apartments in the complex will turn it into a mixed-use complex, to the benefit of all, both the business owners and the new tenants.

It is clear that converting a significant portion of offices in favor of residences will require strategic thinking and renewed planning among decision makers, including, of course, municipalities and local authorities. This redevelopment may run counter to the classic concept that existed in the past of a dichotomous division between residential zones and commercial zones. However, and this is a big point, in the end everyone will benefit from it: the business community, the real estate market, the municipalities and, above all, the State of Israel.