Tel Aviv is a city with a fascinating history. Dragged from the sand dunes, it now sits on the shores of the Mediterranean Sea with a global reputation for excellence in cuisine, entrepreneurial activity, the arts and now modern architectural excellence, due to the trend setting mega blocks rising from what was once a famously arid and unforgiving landscape.
THE FOUNDATIONS OF SUCCESS.
Renowned photographer Avraham Soskin’s famous 1909 photograph of the land lottery, (although now recognised as staged) where a group of new “shareholders” stands huddled together in the sands gives no indication of the sparkling city that was to arise from the dunes. The city was established despite the protest of the lone figure at the top of the photo who, as legend has it, yelled out “meshugaim, eyn kan mayim! (You’re crazy, there’s no water here!).
Today the beating heart of Tel Aviv, ‘The City That Never Stops’ is without doubt Rothschild Boulevard, an eclectic mix of old and new, today the site of some of the most prestigious addresses in the greater Tel Aviv area. The Boulevard boasts some of the most unique architecture in the Tel Aviv Jaffa area and is a focus for business and for relaxation in this vibrant and cosmopolitan city.
A shady, tree lined boulevard, where history is as accessible as the excellent shwarma that is available from vendors in the area. Rothschild Boulevard was, in the past, the main road street in the city of Tel Aviv and the majority of the buildings here were built at the start of the 20th century. For those with an excess of time on their hands it is possible to find the first street light to be placed in the city.
Nowadays, the scenic boulevard is one of the main serious locations of entertainment in Tel Aviv. On Fridays, in the summer, there are street parties, creating a fun, young and vibrant enclave of modern street style in the area.
However, visitors and potential investors should not be taken in by the seemingly frivolous activity, nor the relaxed atmosphere that characterises the Boulevard.
This vibrant thoroughfare is where Tel Aviv’s (and some would say a goodly proportion of the globe’s) heavy hitters in financial services, the arts, design and especially the vibrant start-ups that Israel is justly famous for come to let their hair down and discuss where the next million is coming from or strategise over the next big thing in hi tech.
Rothschild Boulevard has gained recognition as one of the most desirable addresses in Tel Aviv. In the heart of a liberal and forward looking city, the tree lined thoroughfare (more boulevard than street) consists of two lanes of traffic separated by a narrow park, with a lane for pedestrians and another for bicycles (a model that many other international cities might do well to emulate). The boulevard ambiance is reinforced by a scattering of gardens, trees, small playgrounds and as a salute to the Mediterranean underpinnings of the city even Bocce courts.
The Boulevard had its beginnings as the dusty and almost bucolic main thoroughfare of the city around 1900 (it’s difficult to put an exact date to the formation of Tel Aviv due to various challenges in defining exactly what constitutes Tel Aviv proper) and many of the buildings date from the turn of the century, however today these historical traditions, although reflected in the architecture have been supplemented by a vibrancy and youthful exuberance that sees Rothschild Boulevard as one of the most sought after addresses in a city with both ancient foundations and an eye set firmly on the future.
This attitude is nowhere more apparent than what is rapidly becoming an eclectic mix of the modern approach to architecture, balanced by both the traditional and historically noteworthy. Rothschild Boulevard is today undergoing a renaissance as one of the most sought after areas for both residential properties and as a prime opportunity for those buyers looking to maximize their property investment in a market that is today characterised by increasing barriers to entry based on increasing costs and the development of new properties aimed at both domestic first time buyers and international owners.
Rothschild Boulevard has a long history of pushing the envelope as far as property development in Tel Aviv is concerned. The first skyscraper in Tel Aviv, Shalom Tower, near the bottom of Rothschild at 9 Ahad Ha’am, was built on the site of the city’s first building, Gymnasia Herzlia (1909). Although the site is today a shopping centre, complete with observation deck developers are taking their direction from the trend setting building and reaching upwards to provide high rise buildings which enrich Tel Aviv’s reputation as one of the most forward thinking and vibrant cities in the world.
Luxury properties in this international, cosmopolitan city draw international, cosmopolitan prices. Those interested in premium real estate in the centre of Tel Aviv can expect to pay prices which are directly comparable to high rise apartments in other major cities, such as New York, London and other cities which are renowned for apartment blocks that soar ever higher. There can however be no doubt that scarcity has played its part in the high cost of apartment living in sought after streets like Rothschild Boulevard. Although many of the new apartments buildings have recently been completed or are about to open their doors to residents, speculation for investment purposes, combined with restricted availability have all contributed to premium pricing.
ROTHSCHILD BOULEVARD IN THE 21ST CENTURY.
In addition to luxury high-rise apartment and commercial projects, a number of the beautiful, historic low-rises along Rothschild Boulevard are currently being renovated and a number of others are expected to be undergoing preservation projects in the near future.
If there is one trend that is transforming the property market in the Rothschild Boulevard area it is the hunger for high quality apartment style living. Both domestic and international buyers are willing to tolerate prices in the region of $25,000 per square meter if the development boasts the amenities, easy access to lifestyle choices in the area and design that leverages the latest in international trends. Although the costs of purchasing in the area have been steadily rising, this has been offset to some extent by the sheer amount of choice available to those in search of a view over the Mediterranean and a premium, high end luxury living choice and a truly stylish address.
Although the purchase price of apartments in sought after suburbs in Tel Aviv (like Rothschild Boulevard) has been rising, it is worth noting that the latest trend analysis indicates that this increase is not limited to only the higher end addresses and is in fact in line with general property prices in the greater Tel Aviv area, which has seen prices rise 9% year on year (the figures are for 2012, the latest complete set of statistics available). This is by no means out of step with increases in other major cities across the globe. The perception of Rothschild Boulevard as an expensive option seem to be based on a supply and demand curve that has been characterised by a lack of available options. This is changing rapidly as more floor space becomes available in high end apartments.
Of course as Rothschild continues to develop, the mixture of old world charm, abundant choice as far as entertainment and dining options are concerned and the increased development of state of the art apartment blocks will continue to drive investment value.
Developments like the luxurious Bauhaus building on Rothschild, which leverages the Boulevard’s proud tradition of architectural elegance and European styling have set the tone for the newest developments which are springing up in the suburbs surrounding Rothschild Avenue. Interestingly enough Tel Aviv is home to over 5000 Bauhaus inspired buildings (although none can match the scale of ‘Bauhaus’ on Rothschild) and the city has undergone an ambitious reconstruction and preservation program which has led to UNESCO ‘world heritage site’ recognition.
Each of the apartments covers an entire floor and feature state of the art air conditioning and management systems and “smart home: management functionality. In keeping with the latest international trends towards integrated living solutions the ground floor of the building is a 170sqm duplex ideal for either hosting exclusive dinner parties or just throwing off the worries of the hectic modern lifestyle.
Apartment buildings like Bauhaus which offer various lifestyle choices, such as the option of the 170sqm duplex with a 50sqm yard, or the 1st floor apartment that has access to an additional 20sqm fully fitted unit with a separate street level entrance are attracting interest from both investors and families looking to enjoy a combination of luxury, style and central location in one of Tel Aviv’s most exciting areas. The choice of apartments which units of 135sqm on the 2nd and third floors and an airy 200sqm penthouse on the 4th and 5th floors (complete with 40sqm terrace and the option of q private pool), epitomise the options available to buyers.
If choice is one of the issues that attract both residential and investment buyers then a new trend is set to leverage another hot button issue, and that is sheer size. Given that the climate and views of Tel Aviv make it the ideal city to enjoy a Mediterranean lifestyle developers are betting that buyers will flock to the new ‘mega apartment developments’ that are being constructed on Rothschild Avenue.
THE INTERNATIONAL INFLUENCE.
In recent years the upsurge in developments along Rothschild Boulevard has seen some very well known international architects set their sights on developing the Boulevard’s signature apartment building. One of these is Richard Meier, world renowned American architect and designer of trend setting buildings like the Manhattan Perry Street Towers and the Los Angeles Getty Centre, as well as the iconic Museum of Modern Art in Barcelona.
His involvement in any architectural project is almost guaranteed to ensure success. The Pritzker Prize Winner (The Pritzker Prize could be called the Nobel of architecture) is perhaps uniquely positioned to provide added value as far as design concepts for apartment blocks on Rothschild Boulevard are concerned.
In keeping with Meier’s signature architectural style of adorning all of his buildings in white, The Meier has been designed to blend with this architectural heritage which is perfectly suited for the Mediterranean ethos and historic architectural foundations of this area of Tel Aviv. As a reflection of the Mediterranean lifestyle which is tremendously attractive to a select group of investors it is a hugely successful approach to design.
In fact the area around Rothschild Boulevard has been known as ‘White City’ so named on account of the bright colours which epitomise the local building style, characterised by white, off-white, light yellow.
A number of Richard Meier projects along Rothschild are exciting great interest from property owners and investors. The Meier on Rothschild Tower (which will Tel Aviv’s tallest building when completed later in 2013) is 37 floors of exceptional architectural design, and offers apartments ranging in price from $1.4 million to the stratospheric $40 million range.
A notable example of what might be termed a mid priced unit is the 395sqm apartment in the ‘The Meier on Rothschild’ development, which was snapped up for a little over $5 million, a steal considering what some property investors are paying to get their foot in the door of what many are now considering a potentially volatile market. These prices have not been experienced in Tel Aviv prior to the development of the new ‘mega towers’ so just how high the prices can go before suffering a sort of self correcting vertigo is anyone’s guess.
With the names of well known developers, The Berggruen Israel Corporation and Richard Meier behind the ‘The Meier on Rothschild’ development, these prices are unexceptional, indeed they can be seen as extremely good value for money, especially if the units are purchased as investments and are leveraged to provide rental income to cover any investment.
REACHING FOR THE SKY ON ROTHSCHILD.
The trend towards the development of taller luxury apartment blocks in Tel Aviv (including the latest Rothschild Boulevard developments) is a global phenomenon. According to Yigal Zemah, chief executive of Berggruen Residential, the trend simply makes sense for developers.
“For developers, it makes more financial sense to build a bigger project. Land is very scarce and to increase profit the only way to go is up.” He says building higher is a win-win for everyone: Buyers will pay more for higher units with spectacular views of the Med and much sought after seclusion, while developers ultimately increase their profit margins.
The ultra high apartment blocks have ultra high price tags for a number of reasons, but at least one these is the fact that costs escalate rapidly with each additional floor that is planned. To begin with building high means going deep. Building foundations can reach down six stories underground.
Add the cost of dampening the effect of high winds and prices for individual apartments can cost 10’s of millions of Dollars. Tall towers, especially those built on smaller footprints, tend to sway, which can be especially perceptible, even dramatic, at upper levels. Many tall buildings feature specially designed high end, ultra expensive dampening systems to counteract the effects of wind.
Smart, ultrafast, quiet elevators add to the cost. Regular models slow down as they move higher into the air, especially on windy days. New buildings also feature backup generators that can keep lifts running in a blackout.
Still, well heeled buyers across the globe (Israel is no exception to this global phenomenon) are parting with record sums to reach the top of the world.
“To some extent there is a feeling of triumph to be very high up. It’s a status symbol,” says Zemeh. “This gives buyers a good feeling about their view and their self-image.”
This drive towards an association with the biggest and the best that global design and architecture has to offer have increased the pace of new development and areas with the Rothschild Boulevard precinct have taken on a distinctly developmental air.
However, with many of the newest apartment blocks nearing completion or having been recently completed the Boulevard should return to its glory as an integrated destination, combining luxurious living, ample entertainment options and vibrant street life which has seen the global travel guide Lonely Planet label Tel Aviv as the best city on the world, for both work and play.
The Meier on Rothschild is an extremely attractive property investment, billed by the developers as a ‘one-of-a-kind masterpiece’ which is arguable given how many similar developments are currently under construction in the Rothschild Boulevard area. Words such as chic, upscale, integrated, exotic and bohemian, combined with phrases such as ‘extensive views over calming waters of the Mediterranean Sea’, ‘the surroundings blend seamlessly’, ‘merging the upscale cultural energy’, ‘the pulse of the city’ all seem to be part of the new language of developers who are making their mark on Rothschild Boulevard.
However tempting it is to dismiss such marketing doublespeak, as unlikely as it may sound to more jaded international investors, these marketing claims trumpeted in brochures slipped under doors or available for download have the ring of truth. The revitalisation of Rothschild and the new high rise buildings are creating in Tel Aviv something special, an architectural showcase.
For now the appetite for luxury condominium shows no sign of slowing, on the contrary, existing properties and the influx of new entrants are driving prices higher and both medium and long investors are being spoiled for choice.
Take for instance the runaway success of 1 Rothschild Boulevard developed by the Habas Group on Rothschild. An apartment building characterised as a more sedate, elegant alternative to some of the other sky scrapers being developed in the area, 1 Rothschild is being positioned as a playground and opportunity for the mega wealth to display a more understated attitude towards wealth.
How one could successfully claim understatement in a 32 storey glass and steel tower is something that is providing property journalists with some food for thought, but if current sales figures give any indication of the success of this positioning then the Habas Group might have found a rare niche based on a desire for understatement in a sea of completed and ‘under construction’ projects that are building a reputation for a ‘look at me’ attitude.
One of the smaller developments in terms of the number of apartments (37 residential units) 1 Rothschild is unashamedly aimed at the ultra wealthy. The apartments themselves average over 400sqm in size which goes some way to explaining the limited numbers that are available in the development.
1 Rothschild Boulevard is designed to fit the lifestyles of those that call it home. Each apartment, ranging in size from 190sqm to 1,200sqm, is equipped with balconies and 3.15 meter floor-to-ceiling windows, enabling residents (at least those without any fear of heights) to take in the spectacular views across the city and the Mediterranean. The apartments’ high ceilings create a specious interior ambiance which further enhances the attractiveness of the units. The apartments also have no interior supporting columns allowing residents even more leeway in designing a living space to suit their individual needs and unique lifestyles.
The attention to detail and the impressive lobby, boasting a ceiling height of 12 meters leave both residents and visitors alike under no illusion that this is an apartment block reserved for only the elite homeowner. A 900sqm outdoor pool and garden located on the building’s lower-level, seventh-floor rooftop reinforces this impression no uncertain terms. The 31,000sqm building also features a six-level, 11,000-sqm underground parking facility, and an adjacent 3,000-sqm retail and office space with its distinctive, specially-made white Swiss glass facade and box-like design giving an eye catching hat tip to the architectural history and Bauhaus ambiance of Rothschild Boulevard.
Launched in 2007 and opened to residents in 2010, 1 Rothschild Boulevard’s apartments were quickly snatched up by the well healed clientele, all the units were purchased within a year of release, a testament to the demand for quality high rise living on Rothschild Boulevard . A short distance from Israel’s financial centre, the building is now home to many members of Israel’s business, industrial and cultural elite. The project has generated total sales of $220m and profits of 32%-34% for Habas, and the units have been reselling at a premium ever since their debut onto the Tel Aviv property market.
ROTHSCHILD BOULEVARD – AN EVOLUTION.
After reading the above the foreign investor may be forgiven for thinking that the Rothschild Boulevard area was an investors dream, with steadily increasing demand driven by a domestic trend towards city living and the ease and convenience of the apartment lifestyle in particular. The reality of the rediscovery and renewal of Rothschild Boulevard as a desirable address was not in fact driven by domestic demand for high quality residential apartments and the attractions of Rothschild Boulevard.
Only a decade ago market commentators, business and financial journalists and Israeli’s in general scoffed at the idea that deeply unstylish and neglected Rothschild Boulevard address would within only a few years become one of the most sought after locations in the Tel Aviv area.
Israeli property buyers and investors had ignored several factors that continue to influence the trend toward apartment living in cities across the globe.
- The global move towards city revitalisation was accelerating. The movement has seen old buildings renewed in declining neighbourhoods and stylish new apartments being developed alongside these historical buildings.
- The search for value in attractive and cosmopolitan cities was driving huge amounts of foreign investment across the globe. Israel was not exempt from this trend.
- North American buyers were also becoming increasingly attracted to exclusive, stylish and unique residential towers.
- Developers such as Habas were extremely adept at spotting trends and investing large amounts of money in developments which would deliver superior returns. Developers like this were prepared invest in the future, despite domestic opinion.
- Israeli’s had been fleeing the areas and suburbs surrounding and indeed Rothschild Boulevard itself for decades, committed to the European ideal of a suburban house with a garden and ignoring the investment and even lifestyle opportunities of apartment living.
The developers and financiers were betting that Israel would not be immune from the trends that were shaping cities around the globe and were betting heavily that foreigners at least would see the value to be found in a new style of high rise ‘super apartments’ on the shores of the Mediterranean Sea.
At the same time the authorities announced their intentions to both preserve and upgrade the ‘White City’ area of Tel Aviv, including the restoration of 1,000 of the 4,000 buildings erected during the so called ‘international style’ during the 1930’s. The project received a shot in the arm when UNESCO declared the White City a world heritage site and the Rothschild Boulevard area began its stratospheric rise to an icon of stylish chic.
It was a perfect storm of opportunity for developers and they did not let the opportunity slip. It was not long before international buyers flocked to the new developments and newly revitalised area and the stage was set for increased investment opportunities based on steadily increasing value.
RENTAL DRIVING INVESTMENT VALUE.
Rentals in the greater Tel Aviv area have been steadily increasing, in line with trends affecting towns and cities across Israel. In the country as a whole rentals rose by an average of 4.9% during the course of 2012, according to the Israeli Housing Ministry, with the highest increase in the Tel Aviv area where rental costs skyrocketed by 6.7%. However, this should be compared with rental increases in the Southern area of the country and in Haifa’s Northern suburbs where year on year increases of around 7% affected the housing market.
Astoundingly, the cost of renting a home in Tel Aviv has risen 50.3% since 2008, significantly more than the national average of 42.7%. The driving force behind this sharp increase are without doubt the property investors who had grown used to returns of between 8% and 10%. Faced with returns closer to 5% these investors raised rents in order to meet this historical benchmark. The trend of increasing rental costs is one that seems set to continue at least in the short and medium term. The current rental costs may be dismaying to first time home seekers and it is a trend that looks set to continue, driven in part by pressures related to supply and demand.
Although the new developments that are springing up in the most desirable parts of Tel Aviv may on the face of it be facilitating new home ownership by increasing the supply of high quality options the reality is that these properties are being developed to provide investment opportunities to a select group of affluent buyers. The statistics seem to bear this out. The number of investors buying homes is shrinking, putting pressure on the supply of rental apartments. In the last 2 years, according to treasury figures, buying to rent as an investment decision accounted for only around 23% of all purchases of homes, down from 30% in 2009.
These figures do not however tell the entire story. The reality is that the option of renting these new apartments is available to very few high income earners and the affluent ranks of the rich and famous and the developers of these types of investments are well aware that the rental market for the units is highly specialised and focused.
Due to this focus the demand for high end investment or rental options based on cutting edge designs and integrated living options that take advantage of the unique lifestyle offered on Rothschild Boulevard remains extremely vibrant.
So what does the future hold for developments on Rothschild Boulevard and in the surrounding areas and suburbs?
It is worth noting that property in Israel remains an extremely attractive investment. Rothschild Boulevard in Tel Aviv is at the vanguard of delivering exceptional returns to investors and owners and new developments are already being planned that will take the area to new heights. The area is vibrant and offers an exceptional choice of lifestyle options and as work goes on to preserve and maintain the unique qualities of the White City the suburbs surrounding Rothschild and the Boulevard itself will only become more attractive as an investment and lifestyle choice.
Other factors are also placing strain on the supply of quality housing in Israel, including high birth rates and a steady inflow of emigrants. The demand for both mid level and high end housing will continue to drive prices upwards. Two important trends (as well as other macroeconomic factors) are contributing to exceptional returns on property investment. Firstly taxes on property remain low when compared to international norms, producing a higher yield for rental properties than would be possible with other financial instruments, including long term bank deposits. Secondly the Israeli government has responded to a public outcry regarding increased costs of housing by making first time apartment rents tax exempt.
Rothschild Boulevard may be at the higher end of the rental market, however taking into account classic supply and demand economic models driven by limited space and government restrictions on the demolition of existing historically important properties (in this sense the White City prices are to a certain extent the victim of the success and popularity of the area) the prices will continue to rise until they plateau at a level where other, competing investment and lifestyle choices reach parity with the offerings on Rothschild.
For now interest from the rich and famous, including international celebrities and entrepreneurs (driven in part by Israel’s increasing reputation as a ‘start up friendly’ country) continues to power the vibrant property market on Rothschild Boulevard. The view, quality of life, proximity to schools, shopping opportunities, entertainment options, easy access to Tel Aviv’s beaches and the unique and sought after designer nature of the mega apartments also contribute in no small way to the attractiveness of the Boulevard as an investment and lifestyle choice.
Given all of the above it is unlikely that prices on Rothschild Boulevard will drop within the short to medium term. In fact the current situation which sees Tel Aviv as having the (some might say) most expensive real estate (per square foot) in the world is one that will not change anytime soon. This continues to attract the attention of investors across the globe. As the city grows and new apartments are developed these too will in all likelihood be modeled after the existing developments and will probably also be characterised by high prices for apartments.
Comment on the future of the market in both Tel Aviv and in other cities in Israel characterised by increasing demand for high end apartment living and skyrocketing prices is appropriately left to one of the men behind the revitalisation of Rothschild Boulevard, Hertzel Habas. In an interview with Calcalist in 2011 the Chairman of the Habas Group suggested that although investment in Rothschild Boulevard might have seemed counter intuitive when it was first mooted, it resulted in excpetional returns.
“Today, people are telling themselves in a slightly ridiculing tone: “What risk did Hertzel Habas take when he bought the Rothschild land and decided to build an apartment block on it? People just don’t remember that in 2003, when I bought the land, no one wanted to live on Rothschild Boulevard. Some were offering their plots at no cost; just take it. Even so, there were no takers. I remember going to see my father and telling him that I had purchased the plot. Even he raised an eyebrow. I thought that the plot was located in the right place in urban terms. I conducted my own checks and the simple fact is that the gamble paid off.”
The situation on Rothschild Boulevard is today very different from that which characterised the neighbourhood in 2007. In fact Rothschild Boulevard bears little resemblance to the historically important but depressed area that existed only a short time ago. Walking down the Boulevard and taking in the vibrant sense of purpose that characterises those who enjoy its unique ambiance one has no doubt that the future of Rothschild, at least for the foreseeable future looks extremely rosy.
The desirability of the lifestyle on Rothschild is only one of the contributing factors to the attractiveness of property investment in the area. The new wave of designer apartment blocks may not be contributing directly to solving what many view as a lack of quality housing options available to the average Israeli, however these mega blocks are contributing in other ways to making both Tel Aviv and the country as whole into an attractive destination for investment. The knock on effects of having apartment blocks designed by the most influential architectural minds of the modern era should not be underestimated.
It is said that success breeds success. With the undeniable success of these unique and highly sought after apartment blocks comes a renewed sense that the Israeli property market is both vibrant and robust enough to withstand macroeconomic shocks and that the unique lifestyle choices offered in Tel Aviv will continue to prove irresistible to those in the market for investment opportunities and those in search of a unique and stylish lifestyle choice.
Israel is a young country at heart and contrasting the desert landscape that would be the foundation for building a new and shining city on the Mediterranean with the global Tel Aviv of today is an exercise that property developers have taken to heart.
Where there is a chance to build something of value there will be those who will seize the opportunity. In the case of Tel Aviv and Rothschild Boulevard, developers have succeed in pushing back a metaphorical desert of a sleepy inner city precinct even further and creating an oasis of style, elegance and vibrancy that is setting the tone for many other cities around the world.