Natam Report · office market in Herzliya Pituach continues to lead as a high-demand area with high prices and occupancy rates. • In the Haifa, Jerusalem and Beer Sheva regions

No. 40 | Second Half of 2017

Natam ReportOffice and Industrial Market

Introduction

Survey of Office Market in the Tel Aviv Area

Survey of Office Market in the Periphery of Tel Aviv

Survey of Office Market in Haifa and the Northern Region

Survey of Office Market in Jerusalem

Survey of Office Market in Beer Sheva

Survey of Industrial and Logistics Buildings

Survey of Income Bearing Real Estate Market

The Natam Assets Group

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Introduction

Natam Report | Second Half of 2017

Principles of the Survey:The Natam report surveys office and industrial properties in various regions in Israel and provides a representative sample for comparing rental prices and occupancy rates. In this survey we refer to 2 classes of office buildings: Class A and Class B, in light of the quality and price differences between them. All of the surveyed office space is available for occupancy within 6 months.

The buildings included in the survey meet the following criteria:Class A:• At least 10,000 square meters of built space above the ground floor.• Full central air-conditioning systems and multiple elevators.• High standard internal finishing in the public spaces.• Maintained by a professional management company.• Asking rental prices reflect new built out space or shell and core space with landlord contribution towards finishing of NIS

2,500 per gross square meter (as of the date of the survey).

Class B:• At least 5,000 square meters of built space above ground floor.• Good / Reasonable standard of internal finishing in the public spaces.• Buildings which are perceived as lower quality than Class A buildings and are appropriate for tenants seeking a less

expensive alternative.

General Trends• Hundreds of thousands of new square meters entered the Tel Aviv Class A office market during the second half of 2017.

The massive addition of office space reduced the occupancy rates in the main office areas (Igal Alon, Ha'arba'a and the northern main business area). A mixed trend is evident with respect to rental prices. Prices in new office buildings that are owned by single owners remained at the existing market average, while average rental prices in office buildings that are characterized by multiple owners declined, due to increasing competition.

• Asking prices and occupancy rates in the Tel Aviv periphery office market increased, due to shortage of new supply. The office market in Herzliya Pituach continues to lead as a high-demand area with high prices and occupancy rates.

• In the Haifa, Jerusalem and Beer Sheva regions a moderate increase in office prices is anticipated due to shortage of new construction.

• In the industrial and logistics buildings market there is a trend of increased demand for storage areas and areas for logistics centers, due to an increase in on-line trading (E-commerce). This trend is expected to continue in the coming years and to lead to an increase in land prices and rental fees for these areas.

• During the second half of 2017, the income bearing real estate market was characterized by a low supply of assets. Owners of income bearing assets do not tend to sell in the absence of investment alternatives, particularly in light of the low returns on bank deposits and debentures. Therefore, the trend of returns declining to levels of 6.5%-7.5%, in accordance with the nature, quality and location of the assets, continued.

Office Space Marketed by NATAM

Ga'ash Office Complex Hacarmel Gate, Haifa Mega Or, Ariel

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Location Number of Buildings in Survey

TotalSpace in Survey

(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)

AverageAsking PriceSecond Half

of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Ramat Hahayal 13 244,186 95.98% 95.41% 80.4 80.81 19.6 687.50

M. Begin Corridor 15 726,293 96.64% 86.30% 106 105.39 21.05 935.45

City 5 104,204 97.65% 98.59% 121.4 122.40 21.89 987.5

Central Tel Aviv 2 29,850 92.05% 93.05% 98.5 105 20.5 1,075

Manshia 2 45,287 96.59% 94.97% 85 77.5 21 650

Yigal Alon Corridor 6 313,268 92.44% 83.73% 103.75 100.83 20.17 941.67

Courthouse 6 134,624 97.4% 95.84% 118.57 115.56 23.22 1,294

Bnei Brak 5 263,280 96.71% 97.17% 73.83 71.75 17.21 825

Ramat Gan-Bourse 10 303,204 97.51% 96.22% 98 92.91 20.40 835.5

Total/ Average 64 2,164,196 96.31% 91.13% 98.4 96.91 20.56 914.34

-5.37% -1.51%

Survey of Class A Office Buildings in the Tel Aviv Area

Second Half of 2017| Natam Report

The survey examined 64 Class A buildings in 9 central areas in the Tel Aviv area, which constitute a representative sample of all of the office areas located in this urban district. The total area of the surveyed buildings is 2,164,196 square meters.

Summary of the Survey’s Data

Data Analysis• The average occupancy rate in the Tel Aviv Class A office market

declined, due to the completion of the construction of a number of office building projects which added significant supply of offices to this market. Nevertheless, the average occupancy rate in the Tel Aviv area remains high at 91.13%.

• There is a significant decline in occupancy rates in the areas of the Menachem Begin and Igal Alon axis, due to the completion of the construction of the Alon Towers, the Ha'arba'a Towers and the Midtown Tower. In the other areas the occupancy rates remained stable without significant fluctuations compared to the previous survey.

• The average rental asking price continues the trend of moderate decline, similarly to the decline that occurred in the previous six month period. The Tel Aviv City area and the Courthouse area continue to be the areas with the highest average rental prices among the other surveyed office areas in Tel Aviv.

Forecast• We anticipate a gradual increase in average occupancy rates due

to high-tech and technology companies opening development centers in Tel Aviv (such as Amazon and Facebook which rented 33,600 sq.m. in Azrieli Sarona this year), and due to the opening of collaborative work spaces (WEWORK, BE ALL, REGUS, LABS).

• We anticipate that during the next six month period the trend of declining prices will continue, mainly in office buildings that are characterized by multiple owners, and in the small-medium (up to 500 sq.m.) office market, due to the significant supply that entered the market – approximately 400,000 sq.m. of offices in new projects, including the Alon Tower, the Midtown Tower and the Ha'arbaa Tower.

• The construction of office buildings, including the Recital and WE Towers, and the TOHA Project on Totzeret Ha'aretz, is due to be completed in 2019, and this will increase the office supply in the area.

The Change

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Occupancy Rate of Class A Office BuildingsComparison with Previous Six Month Period

Rental Prices Class A Office BuildingsComparison with Previous Six Month Period

Second Half 2017First Half 2017

RamatHahayal

RamatHahayal

City CityM. Begin Corridor

M. Begin Corridor

Central Tel Aviv

Central Tel Aviv

Yigal AlonCorridor

Yigal AlonCorridor

Manshia ManshiaBnei Brak Bnei BrakRamat-GanBourse

Ramat-GanBourse

Courthose Courthose

Average Asking Price First Half 2017 (Shekel/sm)

Average Asking Price Second Half 2017 (Shekel/sm)

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(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Ramat Hahayal 9 92,455 91.84% 97.10% 68.1 68.81 15.07 592.31

M. Begin Corridor 11 107,936 89.54% 84.74% 72.89 72.89 19.99 699.08

City 3 53,210 87.78% 93.50% 79.3 75 19.24 875

Central Tel Aviv 3 35,836 97.69% 95.81% 93 93.33 22.33 600

Manshia 4 57,035 93.76% 96.14% 61.67 58.75 22.88 682

Yigal Alon Corridor 7 100,975 95.67% 91.78% 73 70.20 18.75 575

Courthouse 2 25,400 96.06% 91.71% 96.5 92.33 18.67 1,050

Bnei Brak 3 44,593 96.69% 94.30% 58.83 58.33 16 500

Ramat Gan-Bourse 8 98,166 95.42% 92.28% 70 69.07 18.67 686.67

Total/ Average 50 615,606 93.67% 92.39% 74.8 73.19 19.07 694.34

-1.36% -2.15%

Survey of Class B Office Buildings in the Tel Aviv AreaThe survey examined 50 Class B buildings in 9 central areas in the Tel Aviv area, which constitute a representative sample of all of the office areas located in this urban district. The total area of the surveyed buildings is 615,606 square meters.


Data Analysis• The average occupancy rate in the Tel Aviv Class B office

market declined by 1.36% but remains high at 92.39%. The Ramat Hachayal, the Tel Aviv City and Menashia areas are demonstrating increased occupancy rates during this six month period compared to the other areas which are characterized by a decline in occupancy rates.

• The average asking rental price is NIS 73.19 per square meter. There were no material changes in the rental prices in most of the areas surveyed in the Tel Aviv Class B area and these areas are demonstrating stability. However, in a number of areas, such as Igal Alon and the Courthouse area, there is a decline in rental prices, due to the changes in supply in the office market in such area.

Forecast• We anticipate a continued moderate decline in rental prices. Due

to the large supply of Class A towers and the trend of declining rental prices, in some areas the difference between Class A building rental prices and Class B building rental prices has diminished and many companies currently renting offices in Class B buildings are expected to attempt to improve the terms of their rental vis-à-vis the asset owners.

• In Class B buildings which are not located in strategic areas (proximity to the train, commercial areas, etc.), we anticipate a decline in prices or, alternatively, investments in finishing budgets and in the level of the assets, in order to maintain occupancy rates.

The Change

Natam Report | Second Half of 2017

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Occupancy Rate of Class B Office BuildingsComparison with Previous Six Month Period

Rental Prices Class B Office BuildingsComparison with Previous Six Month Period


RamatHahayal

RamatHahayal

City CityM. Begin Corridor

M. Begin Corridor

Central Tel Aviv

Central Tel Aviv

Yigal AlonCorridor

Yigal AlonCorridor

Manshia ManshiaBnei Brak Bnei BrakRamat-GanBourse

Ramat-GanBourse

Courthose Courthose



5Second Half of 2017| Natam Report



(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Herzliya Pituach 15 193,167 92.99% 94.66% 92.5 96.53 20.33 606.67

Ben Gurion Airport Area 6 124,000 94.48% 91.37% 66 64.58 14.33 363.33

Petach Tikva 13 204,475 92.77% 88.62% 70.64 70.16 18.5 459.09

Raanana 5 86,819 82.52% 98.45% 72.5 75 18 480

Netanya - Poleg 11 93,700 88.32% 96.27% 55.71 57.73 14.64 314.09

Rehovot – Ness Ziona 5 74,500 93.91% 86.58% 67.4 67 11.6 420

Kfar Saba / Hod Hasharon 2 37,336 90.62% 95.18% 68.5 73 16.50 525

Rosh Haayin 3 54,840 88.09% 88.70% 51.67 48.84 14.67 350

Total/ Average 60 868,837 90.44% 92.27% 68.11 69.10 16.07 439.77

+2.02% +1.45%

Survey of Class A Office Buildings in the Periphery of Tel Aviv The survey examined 60 Class A buildings in 8 central areas located up to 30 kilometers from the center of Tel Aviv. The total area of the surveyed building is 868,837 square meters.


Data Analysis• There was a 2.02% increase in the occupancy rates during this

last six month period compared to the previous six month period, averaging at 92.27%. The Sharon area is demonstrating increased occupancy rates in all of the surveyed cities, as opposed to other areas in the Tel Aviv periphery which demonstrated declining occupancy rates.

• An identical trend is evident in the rental prices, with increased prices in the Sharon area, as opposed to declining prices in the other surveyed areas. The Kfar Saba – Hod Hasharon area demonstrated the highest price increase – 6.56% compared to the previous six month period.

Forecast• Occupancy rates in the Herzliya and Ra'anana areas are expected

to remain high over the next two years, since all of the buildings

that were recently constructed and those which are currently under construction, are in advanced stages of being occupied or are expected to become occupied shortly. Some of the buildings which are under construction are being constructed as part of a purchase group and in such buildings there are mostly sale transactions for end-users who are expected to occupy them.

• The construction of approximately 60,000 sq.m. of offices in Petach Tikva is expected to be completed during 2018. These areas are expected to be occupied by tenants who currently reside in older office buildings in the city and wish to improve their conditions. Additionally, there is a moderate trend of companies that are relocating to Petach Tikva from Bnei Barak, Tel Aviv, Or Yehuda and the area, in order to reduce rent costs. This trend is expected to continue over the next few years along with the completion of the construction of the light-rail.

The Change

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Herzliya Pituach

Herzliya Pituach

Petach Tikva

Petach Tikva

Ben Gurion Airport Area


Raanana RaananaRehovot – Ness Ziona

Rehovot – Ness Ziona

Netanya - Poleg

Netanya - Poleg

Rosh Haayin

Rosh Haayin

Kfar Saba / Hod Hasharon




6 Natam Report | Second Half of 2017



(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Herzliya Pituach 14 128,636 92.21% 97.07% 78.57 79.87 18.86 623.08

Ben Gurion Airport Area 9 74,295 82.64% 96.02% 58.38 60.69 15.1 417.5

Petach Tikva 8 95,900 94.83% 96.09% 54.13 53.33 13.25 435

Raanana 8 77,133 96.87% 88.10% 66.5 65 17.25 486.25

Netanya - Poleg 4 83,232 93.03% 93.39% 44.75 50.91 9.50 275

Rehovot – Ness Ziona 6 69,192 97.9% 94.51% 62 60.64 12.33 375

Kfar Saba / Hod Hasharon 8 73,124 95.91% 96.84% 64.13 64.63 17.31 361.25

Rosh Haayin 6 57,130 93.7% 89.75% 45.6 40.53 14.83 333.33

Total/ Average 63 658,642 93.05% 94.37% 59.26 59.45 14.80 413.30

+1.41% +0.32%

Survey of Class B Office Buildings in the Periphery of Tel Aviv The survey examined 63 Class B buildings in 8 central areas located up to 30 kilometers from the center of Tel Aviv. The total area of the surveyed building is 658,642 square meters.


Data Analysis• The average occupancy rate in the Class B office market in the

periphery of Tel Aviv increased by 1.41% during this six month period compared to the previous six month period. The increase is evident in the entire Sharon area, except for Ra'anana where there was a decline in the occupancy level and which has the lowest occupancy level in the area of the periphery of Tel Aviv.

• The average asking price for rental in a Class B office building increased by 0.32% and at the end of 2017 was NIS 59.45 per square meter. In most of the areas where there was an increase in the occupancy rates there was also a respective increase in the asking rental prices compared to the first six months of the year.

Forecast• We anticipate that the asking prices in Ra'anana will continue to

decline due to an increase in available areas in buildings in this market which leads to asset owners demonstrating more price flexibility.

The Change

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Herzliya Pituach

Herzliya Pituach

Petach Tikva

Petach Tikva



Raanana RaananaRehovot – Ness Ziona

Rehovot – Ness Ziona

Netanya - Poleg

Netanya - Poleg

Rosh Haayin

Rosh Haayin








(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Haifa - City 2 28,700 90.94% 98.33% 60 60 18 350

Yoqneam 3 30,000 79% 62.33% 65 69.20 11.67 350

Matam Haifa 6 106,470 97.97% 98.69% 61.3 63.57 17.83 350

Total/ Average 11 165,170 93.3% 92.02% 62.1 64.26 15.83 350

-1.37% +3.47%The Change

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Haifa - City Haifa - CityYoqneam YoqneamMatam Haifa Matam Haifa



Survey of Class A Office Buildings in Haifa and the Northern RegionThe survey examined 11 Class A buildings located in 3 central areas in Haifa and the northern region. The total area of the surveyed buildings is 165,170 square meters.


Data Analysis• The average occupancy rate in this market at the end of 2017 was

92.02%, reflecting a slight decline compared to the previous six month period. The average occupancy rate in the MATAM area increased slightly – not constituting a material change. However, in Yokneam there was a decline of approximately 21% in the average occupancy rate, due to the entering into the market of new buildings that are not yet fully occupied.

• The average rental price increased compared to the previous six month period and is currently NIS 64.26 per square meter. Among the 3 surveyed areas, the Yokneam area continues to have the highest average rental price.

Forecast• In light of the small number of beginnings of construction, the

market is expected to remain stable.• The MATAM area is expected to continue to be the area with the

highest demand for offices and to maintain a high occupancy level.

Armon (Palace) Tower Haifa, Managed and Marketed by Natam




(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Haifa - City 3 48,740 80.3% 83.79% 45 45.32 16 366.67

Yoqneam 4 41,500 99.16% 96.80% 60 57.56 13.25 350

Matam Haifa 4 47,352 97.89% 97.57% 54.5 59.40 20 350

Nesher / Chekpost 7 69,850 96.77% 93.84% 56.4 55 10 264.29

Total/ Average 18 207,442 93.63% 92.92% 54 54.32 14.81 332.74

-0.75% +0.59%The Change

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Haifa - City Haifa - CityYoqneam YoqneamNesher / Chekpost Nesher / ChekpostMatam Haifa Matam Haifa



Survey of Class B Office Buildings in Haifa and the Northern RegionThe survey examined 18 Class B office buildings located in 4 central areas in Haifa and the northern region. The total area of the surveyed buildings is 207,442 square meters.


Data Analysis• The Class B office building market in the Haifa and the Northern

region maintained stability over the last year and there were no major fluctuations in the average occupancy rate or in the average rental price per square meter.

• The average asking rental price is NIS 54.32 per square meter. Among all the surveyed areas, the average rental price in the Haifa city area continues to be the lowest, at NIS 45.32 per square meter.

Forecast• Due to the fact that many companies are moving from Class B

buildings to new buildings (Class A), the occupancy rates in this market, and the prices, respectively, are expected to decline.

Erco Nesher House, Marketed and Managed by Natam




(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Givat Shaul 6 88,552 98.61% 99.89% 87.5 85 16.67 508.33

Har Hotzvim 6 108,044 93.75% 97.04% 70.8 76.33 17.67 466.67

Central Jerusalem 2 11,500 94.35% 82.87% 95 87.5 16.5 550

Malha 1 20,000 97.25% 98.50% 85 90 19 450

Talpiot 1 2,560 100% 100% 85 85 15 600

Total/ Average 16 230,656 95.97% 97.59% 84.6 84.8 16.97 515

+1.68% +0.23%The Change

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Givat ShaulGivat Shaul Har HotzvimHar Hotzvim MalhaMalha Central Jerusalem

Central Jerusalem

TalpiotTalpiot



Class A Office Buildings in JerusalemThe survey examined 16 Class A buildings located in 5 central areas in the Jerusalem region. The total area of the surveyed building is 230,656 square meters.


Data Analysis• Occupancy rates in the Jerusalem Class A office market remained

high during the second half of 2017, with an average increase of 1.68%. However, in the city center area, there was a decline of 12.16% in the occupancy level compared to the previous six month period.

• The average rental price in this office market at the end of 2017 was NIS 84.8 per square meter and remained almost unchanged, with an average increase of 0.23%.

Forecast• In light of the high occupancy rates and the lack of new available

supply of office space, we anticipate that the occupancy rates and the asking prices will maintain their strength. Additionally, the Talpiot area is expected to become an attractive business center, due to the train that is expected to pass through Pierre Koenig St., the developing commerce and the office buildings that are under construction in the area.

Toyota House, Managed by Natam




(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Givat Shaul 3 31,500 91.9% 97.24% 78.3 78.33 15 513.33

Har Hotzvim 3 25,782 99.77% 99.63% 71.7 66.67 13 450

Central Jerusalem 2 25,200 96.03% 97.22% 70 70 18 650

Malha 4 31,400 93.94% 91.72% 70 66.25 11.25 450

Talpiot 6 40,933 83.94% 95.58% 78.2 65 11 480

Total/ Average 18 154,815 93.52% 96.08% 73.7 69.25 13.65 508.67

+2.37% -6.03%The Change

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Givat ShaulGivat Shaul Har HotzvimHar Hotzvim MalhaMalha Central Jerusalem

Central Jerusalem

TalpiotTalpiot



Class B Office Buildings in JerusalemThe survey examined 18 Class B office buildings located in 5 central areas in the Jerusalem region. The total area of the surveyed building is 154,815 square meters.


Data Analysis• The occupancy levels continue to be very high in most of the

areas, with an average occupancy rate of 96.08% in the last six month period.

• The average asking price per square meter declined by 6.03% compared to the previous six month period. In most of the areas there was a decline of more than 5% in the asking rental prices, except for the city center area, which remained unchanged and the Givat Shaul area which remained the area with the highest average rental price in the Jerusalem area.

Forecast• Many of the buildings in the Givat Shaul area which are part of

this market are in the process of receiving permits to add more floors and this is expected to impact rental prices. Hadarim House, Har Hotzvim, Managed and Maintained by Natam




(sm)

Occupancy rate of

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Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Gav-YamNegev Park 1 18,000 100% 100% 70 70 20 -

No Change No Change



(sm)

Occupancy rate of

First Half of 2017

Occupancy rate ofֿ

Second Half of 2017

AverageAsking Price

First Half of 2017

(Shekel/sm)


of 2017 (Shekel/sm)

Averagemanagement

fees(Shekel/sm)

Parking(Shekel/sm)

Hi-Tech Park Omer 4 36,200 99.53% 99.31% 43.33 43 10.75 -

Beer Sheva City 4 66,975 97.24% 98.06% 62.5 64.38 10.75 368.75

Advanced Technologie s Park 2 9,500 84.21% 82.53% 40 43 10 290

Total/ Average 10 112,675 96.82% 97.15% 48.61 50.13 10.50 329.38

+0.34% +3.12%

The Change

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Advanced Technologie s Park

Advanced Technologie s Park

Hi-Tech Park OmerHi-Tech Park Omer Beer Sheva CityBeer Sheva City Gav-YamNegev Park

Gav-YamNegev Park



Survey of Office Buildings in the Beer Sheva AreaThe survey examined 11 buildings located in central areas in the Beer Sheva area. The total area of the surveyed buildings is 130,675 square meters.


Data Analysis• The price and occupancy rate at the Gav-Yam Park in Kiryat Atidim

have not changed during this six month period. • The average occupancy rate and the average asking price per

square meter in the Beer Sheva area increased during the last six month period compared to the first half of 2017

• The occupancy rates and the rental prices in the Beer Sheva city center increased, with an average increase of 3% in asking prices per square meter. The city center area also presents the highest average asking price per square meter in the area and is currently NIS 64.38 per square meter.

Forecast• Due to significant shortage of new office space, asking prices are

expected to rise throughout the entire Beer Sheva area. Picture of Gav-Yam Negev Park


Survey of Industrial and Logistics Buildings MarketThe Natam report surveys a number of industrial areas in various regions in Israel.

Class A Industrial BuildingsA modern industrial building, minimum 12m. height, sprinklers, dock levelers, operational area accessible for loading and unloading.

Class B Industrial BuildingsA long standing industrial building, minimum 5m. height, operational area accessible for loading and unloading.

Survey of Average Asking Rental Prices per Square Meter – Industrial/Logistics Buildings

Class A Class BLod / Remla 40-43 Shekel Per square meter 32-35 Shekel Per square meter

Modi Shoham 42-45 Shekel Per square meter -

Ashdod / Kanot / Yavne 37-40 Shekel Per square meter 32-35 Shekel Per square meter

Kiryat Gat 32-35 Shekel Per square meter 28-30 Shekel Per square meter

Beit Shemesh / Har-Tov / Tzora 33-35 Shekel Per square meter 27-30 Shekel Per square meter

Ashkelon 30-32 Shekel Per square meter 24-27 Shekel Per square meter

Sderot / Netivot / Ofakim 22-28 Shekel Per square meter 15-20 Shekel Per square meter

Beer Sheva 25-30 Shekel Per square meter 20-25 Shekel Per square meter

Holon / Rishon Lezion / Bat Yam 40-45 Shekel Per square meter 40-45 Shekel Per square meter

Caesarea 36-40 Shekel Per square meter 27-32 Shekel Per square meter

Emek Hefer 36-38 Shekel Per square mete 30-32 Shekel Per square meter

Kfar Saba / Kadima 43-45 Shekel Per square meter 35-40 Shekel Per square meter

Netanya - 30-35 Shekel Per square meter

Mishor Adumim 30 Shekel Per square meter 22 Shekel Per square meter

Atarot 35 Shekel Per square meter 29 Shekel Per square meter

Haifa and the Northern Region 30-35 Shekel Per square meter 22-25 Shekel Per square meter

* The prices refer to the average rent of the ground floor.

Delouya Center Building, Areas for Rent – Marketed by Natam


Petach Tikva – Segula 3,000,000 - 4,000,000 Shekel

Petach Tikva – Kiryat Arieh 3,000,000 - 3,500,000 Shekel

Holon 4,500,000 - 5,000,000 Shekel

Rishon Lezion 4,000,000 - 4,500,000 Shekel

Lod 3,000,000 - 3,500,000 Shekel

Haifa Bay 1,200,000 - 1,500,000 Shekel

Tirat Carmel 1,200,000 - 1,500,000 Shekel

Tirat Carmel 1,500,000 - 1,700,000 Shekel

Carmel 1,200,000 - 1,500,000 Shekel

Emek Hefer 2,200,000 - 2,500,000 Shekel

Caesarea 1,400,000 - 1,600,000 Shekel

North Netanya 2,700,000 - 3,200,000 Shekel

Sourth Netanya 3,400,000 - 3,500,000 Shekel

Kfar Saba 3,500,000 Shekel

Shoham 2,500,000 - 2,700,000 Shekel

Modi'in – Ishpro 2,000,000 - 2,500,000 Shekel

Modi'in – Li Gad 2,000,000 - 2,300,000 Shekel

Beer Tuvia 1,900,000 - 2,200,000 Shekel

Yavne 3,000,000 - 3,500,000 Shekel

Ashdod 2,000,000 - 2,500,000 Shekel

Kanot 2,000,000 - 2,500,000 Shekel

Mishor Adumim 350,000 - 450,000 Shekel

Beit Shemesh 1,000,000 - 1,200,000 Shekel

Kiryat Gat 1,150,000 - 1,250,000 Shekel

Beer Sheva 700,000 - 900,000 Shekel

Ashkelon 700,000 - 900,000 Shekel

The Cargal Lod Industrial Complex – Logistics and Storage Areas for Rent – Marketed by Natam

Data Analysis• There is a sweeping increase in the asking prices for lots due to low supply of areas for rent. Therefore, we anticipate an increase in

asking prices, which derives from the increase in the prices of the lots.

• Significant demand for lots and logistics areas is focused along the main traffic arteries and near the sea ports.

• The quick growth of E-commerce is reflected in the high demand that is evident in the field of logistics and storage buildings and industrial buildings. This trend is expected to continue over the coming years and to lead to an increase in land prices and rental fees for these areas.

Survey of Average Asking Sale Prices per Dunam for Industrial and Logistics Lots

Central Area

Southern Area

ShfelaArea

SharonArea

NorthernArea

Jerusalem


Survey of Income Bearing Real Estate Market – Second Half of 2017During the second half of 2017 the income bearing real estate market was characterized by a low supply of assets. Owners of income bearing assets do not tend to sell in the absence of investment alternatives, particularly in light of the low returns on bank deposits and debentures. Therefore, the trend of returns declining to levels of 6.5%-7.5%, in accordance with the nature, quality and location of the assets, continued.

The Office MarketIn light of the construction of hundreds of thousands of square meters of office space, a trend of an approximate 1.51% decline was evident in the rental prices for Class A office buildings in the Tel Aviv area. In office buildings in prime locations, rental prices maintained stability, ranging between NIS 105 and NIS 115 per square meter for fully finished offices.

However, the decline in rental prices was not accompanied by a decline in sale prices, which ranged between NIS 17,000 and NIS 19,500 per square meter (shell) for new offices (Class A) in prime locations. These price levels reflect a return of approximately 6.5% compared to the rent fee payments.

The trend of erosion of rent fees is expected to also continue during 2018 as the increasing supply of new offices will also lead to a decline in sale prices. It is reasonable to assume that the price decline will be sharper in office buildings that are owned by multiple owners as opposed to office areas in buildings that are owned by single owners. In the Haifa, Jerusalem and Beer Sheva area, a moderate increase is expected in the prices of offices due to a shortage of new construction.

Commercial SpacesTechnological changes and changes in on-line (E-Commerce) consumer habits, have reinforced the assessments that rental prices for commercial centers will decline, which in turn shall lead to a decline in asset prices. This trend is already evident in the decline of share prices of public companies that focus on holding and managing commercial centers. However, the prices of neighborhood commercial centers and of discount stores are expected to remain stable, as they are considered immune to the E-commerce growth trend. The prices of commercial assets reflect a return of approximately 6%-6.5% in central urban locations and in neighborhood centers, and a return of approximately 7%-7.5% in secondary urban locations.

Industry and LogisticsThe mirror image of the quick E-commerce growth is reflected in the high demand that is evident in the field of logistics/storage buildings and industrial buildings. This trend is expected to continue over the coming years and to lead to an increase in the prices of lots and in the rental fees for these areas. The prices for logistics centers range from NIS 5,000 to NIS 6,000 per square meter in the center of the country and near the main north-south roads and from NIS 3,500 to NIS 4,500 per square meter in secondary locations.

Matrix Building, OmerA 2,400 sq.m. office building occupied by AAA tenants.

The Transaction: Natam Invest , together with a group of private investors, purchased a building from the Matrix technology company, in the Omer Industrial Park. Matrix shall remain a tenant of half of the asset for ten years. The remainder of the asset is rented out to the State of Israel and to the Deloitte accounting firm.

Scope of Transaction: 17.3 million shekels.

Midtown Tel AvivTel Aviv's flagship project – a complex that combines residential, commercial and office spaces, located on Menachem Begin Street in Tel Aviv. The office building's anchor tenant is the international E&Y accounting firm, which occupies a third of the building.

The Transaction: Natam Invest, together with a group of private investors, purchased 2 floors of office space.

Scope of Transaction: 60 million shekels.

38 Habarzel, Ramat HachayalNatam Inves's boutique project, located at 38 Habarzel. A solid real estate investment in office units in the business complex in Ramat Hachayal.The Transaction: Scope of Transaction:

The Transaction: Purchase of small fully furnished offices in an existing building, approximately 500 sq.m. on the top floor of the Kikar Tower.

Scope of Transaction: 10 million shekels.

Transactions Completed During 2017 – From the NATAMINVEST Investment Portfolio


Brokerageproperty

MarketingProject

International Real Estate Services

Research

Natam Real Estate Group – All the Services One Choice

Natam Group provides comprehensive real estate services to the commercial real estate market.

For more than 30 years Natam has been leading the Israeli commercial real estate market, offering its clients unique experience, knowledge, and uncompromising professionalism.

The Natam Group was founded in 1985. The Group’s team consists of skilled professionals in all aspects of commercial real estate business, who provide the company›s customers professional services of the highest quality.

Services Provided by the Natam Group

Advisory Services: Representing end users in determining and implementing real estate strategy, including financial consultation, location of properties and management of real estate projects.

Brokerage: Brokering office and high-tech spaces, industrial buildings, halls, warehouses, commercial projects and lots across the country.

Marketing: Marketing services, including branding buildings, advertising and campaign management, public relations and direct sales.

Investments: The investment department offers a variety of investment opportunities in purchasing income-bearing assets or assets for one's own use.

Research: The Group’s Research Department publishes periodic surveys that are widely circulated and serve the business sector, in general, and the real estate industry, in particular. The group conducts designated research for entrepreneurs, public entities, banks and foreign clients.

Property Management: Our company manages over 800,000 square meters of office space, industrial and commercial buildings and exclusive residential complexes, nationwide.

Natam Invest - An Income Bearing Real Estate Investment House: Our company manages income-bearing investments, acquisitions and improvements of industrial, office and commercial assets in Israel.

Property Management

Advisory Services

Investment HouseNATAMINVEST

The Julio Shutz Fund, founded by the Natam Property Group in cooperation with Shutaf, supports inclusion

for children with special needs in the community.

Head Office53 Yigal Alon Street, Tel Aviv

Phone: 972- 3-6894242 Fax: 972- 3-6894243

E-mail: [email protected]

Hasharon Branch18 Abba Even Blvd, Herzliya

Haifa Branch22A Hamesila, Nesher

Jerusalem Branch13 Kanfei Nesharim, Jerusalem

Beer Sheva Branch28 Reger Blvd. Beer Sheva

The report was prepared by Natam Research DepartmentDisclaimer: This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, our company is not responsible for any damage and/or loss suffered as a result of any errors in the report. The report cannot be copied or photographed without receiving approval.

Documents

Natam Report · office market in Herzliya Pituach continues to lead as a high-demand area with high prices and occupancy rates. • In the Haifa, Jerusalem and Beer Sheva regions