Just a few years ago, many eulogized the world of offices. They said it was not economical to invest in office complexes, claiming there was no hope there, and saying that the situation that prevailed before Covid-19 would not repeat itself – people have got used to working from home, and indeed many businesses have found it necessary to reduce the co-working spaces. However, despite all the predictions that seemed realistic enough, there are some surprising facts on the ground. People who did their homework and didn’t allow themselves to be influenced by majority opinion, discovered that they did make an excellent investment – enjoying an amazing return ranging between 10 and 20 percent, especially if they chose to invest in office complexes in the center of the country.
How do you take advantage of a high tide in real estate?
Several small investors, who for years incurred losses because they had difficulty renting out the office complexes they purchased, are now on the other side of the aisle – enjoying high demand alongside an amazing return.
How can this be explained? First, it should be made clear that Tel Aviv is a bubble that is not easy to burst, where there will always be increasing demand for offices. At the same time, today there is a general trend of rising rental prices, while at the same time, designated areas are in short supply. Therefore, today office owners enjoy rental prices double what they were before, especially if we compare them to prices two years ago, the years that caused a loss of confidence in investments in the field
Success doesn't dazzle – price hedging!
The above notwithstanding, it should be emphasized that those who think that the owners of the offices have gone back to believe in the profits of such investments, will find that today’s investors are far more prudent. Today’s success does not prevent us from forgetting that only two years back the situation was reversed, a fact that shows the great volatility that characterizes the sector. How, then, do you cope with it? Price hedging! The idea is that people are not willing to take a risk; that is, they wish to remain protected, and more important, remain on top. Such a step is implemented by hedging rent payments for a period of 5 years ahead. In this manner, it is possible to ensure renting out for an extensive period of time at a price that is considered high, a price that no one can guarantee it will be possible to continue to obtain several years later.
Today, small investors can profit like big investors.
As is often the case in the real estate market, the big investors come out on top, and the small ones capitulate. This phenomenon has been around for years, but it is good to know that today, a significant and welcome change is emerging. Currently a high investment is not needed, so that even in return for NIS 300,000 it is possible to hold a significant share. However, those who previously purchased relatively small areas as part of a purchasing group often found that the promised result was not fulfilled. This is because many of the giant companies preferred to rent entire floors, and in general, to deal with larger companies, so many of the smaller investors had to sell. They did not sell at a loss, but since they sold a property without a renter, they missed an opportunity to earn a significant share.
Today, however, matters have changed, including for the good of the small investor. An explanation? Today, demand is much higher than supply. Thus, even well-known high-tech companies find themselves finalizing agreements with towers that belong to purchasing groups, a fact that benefits the small investor and allows him to realize high returns. However, this is only the beginning. Not only is there ample demand, but renters are also willing to pay twice as much as they paid two years ago, which explains why they too are ready for a hedging deal for a five-year term ahead.
Is there such a thing as a safe move in the realm of real estate?
It should be understood that if you are interested in real estate investments and if you want to invest a small amount and earn a high return, it is definitely worthwhile to take office complexes into account, although, of course, every deal must be examined in depth; and yes, even if it relates to a new office complex built in the center of Tel Aviv. It is important to understand that a thorough examination before any very important transaction is finalized is mandatory, otherwise one can end up with a rent-less office, This, among other things, generates expenses, such as management fees and property taxes.
To sum up what has been said, it should be pointed out that today it is certainly possible to join the game of the greats through a relatively sound investment. It would also be wise to hedge the price, and those who wish to make quick money, can definitely sell the property while rented and enjoy a handsome return. The idea is to make a smart purchase and at the same time consider how long you stay with it. One thing that can be relied upon relatively, is that transactions in Tel Aviv are considered safe – currently the yield they offer is considered the highest.
