ULI - the Urban Land Institute, launched its activity in Israel on November 21, 2016 at an event at the Hilton Hotel in Tel Aviv. The event, hosted by Gazit-Globe, Greenberg Traurig international law firm, Bank Hapoalim's Corporate Banking Division, PwC Israel, Leader Capital Markets, the Gazit-Globe Real Estate Institute at IDC Herzliya, Moshe Tzur Architects and Conforti Raviv Real Estate Appraisal, was attended by around 200 senior executives from the business community in Israel. ULI is a non-profit research and education organization supported by its members. The organization, founded in 1936, operates in more than 95 countries and has almost 40,000 members worldwide.
Mr. Chaim Katzman, Chairman of Gazit-Globe, opened the conference, saying, "Seven years ago we identified the process of urbanization as the major factor in our growth strategy for the long term, which requires a material change in our asset portfolio worldwide. We decided to focus exclusively on shopping centers located in dense urban areas in countries with strong, stable economies. Since 2009, we have sold non-core assets in secondary markets where growth was expected to be low. In this process we reduced the number of the company's total assets worldwide from over 700 properties in 2010 to about 430 assets today.
At the same time, we strengthened our presence in established urban areas with a high growth rate through significant investments in the development of high quality properties located in large cities, and the redevelopment of existing high-quality properties." Mr. Katzman also noted that from 2010 to the end of the first half of 2016, Gazit-Globe sold assets worth 13.4 billion NIS and invested 44.6 billion NIS in acquiring and developing properties.
Commenting on the Internet commerce trend, Mr. Katzman noted, "Today we allocate more areas for products and services that cannot be acquired online such as restaurants, fitness clubs, medical clinics and movie theatres. In the United States, for example, more than 50% of our revenue comes from tenants who provide services".
Attorney Lawrence Sternthal, head of International Real Estate Practice in Israel at, Greenberg Traurig, said, "The volume of international real estate transactions made by Israeli companies and institutional investors has increased significantly in recent years since the end of the recession in 2010. While 2016 was an active year, price increases in the major markets posed new challenges that did not exist during the first years of the recovery. As a result, a significant number of institutional entities preferred to maintain reasonable returns by investing in mezzanine debt products and senior debt loans, and by acquiring properties that are in an advanced stage of development or their full rental potential has not yet been unrealized."
Mr. Ron Huldai, Mayor of Tel Aviv-Jaffa, addressed two major global processes in his speech. First, the migration from rural areas to big cities, and second, the mass migration of populations to developed countries. These pose complex challenges to big cities that are required to provide quality of life to more people in increasingly crowded cities. The mayor went on to discuss his vision for the "urban kibbutz" which requires the city to provide the best services at the lowest costs to residents, at a distance never to exceed half an hour by bike or on foot from their place of residence. "The kibbutz was born 200 years too early, so it failed. For the same reason, it is also expected to make a comeback suited to our times," said Mr. Huldai. He also discussed the need to take care of the public sphere in the urban renewal process, the need to strengthen the sense of community, the need for innovated services and urban development, and the future integration of solutions in the area of cooperative economics in cities. He wondered, “Why should each apartment have a large dining area that stands empty most of the time when we could make reservations at a community dining room and host our guests there? Why don’t we watch television in a community viewing room?”
Ms. Lisette van Doorn, CEO of ULI Europe, presented an overview of the most prominent trends in the European real estate market for 2017, which was conducted by ULI in collaboration with PwC. At the outset, referring to the political risks affecting the business world today, she said, "Throughout my career there have never been so many risks from a political perspective in so many places at once." Referring to Brexit, she said, "it is very difficult to say what the impact of Brexit will be, but I see no reason why London will not continue to be the number one city in the world." She went on to discuss the growing importance of cities in light of the fact that a growing number of people wish to live in them.
Ms. van Doorn presented the ranking of the best cities for real estate investment and development, which shows that Berlin is ranked first in Europe for real estate investment and development, Hamburg second, and Frankfurt third. She said, "Germany is emerging as a safe destination for investment in most scenarios, even if the EU collapses”. Mrs. van Doorn noted that Berlin is a fashionable, young, fast- growing city whose supply has not yet reached demand. She noted that Frankfurt is the main beneficiary of the Brexit decision.
In fourth to tenth places are Dublin, Munich, Copenhagen, Lisbon, Stockholm, Madrid and Lyon, respectively. London and Paris are less attractive, ranking 17th and 20th, respectively. According to Ms. van Doorn "Banks and other companies will probably leave London and therefore, the attractiveness of investing in London now is low." In general, ULI sees the impact of the macroeconomic situation in Europe on the European real estate market, which has become a challenge, noting that target returns have decreased. According to ULI, whereas in 2016 nearly half (45%) of real estate investments in Europe were made in order to achieve returns in excess of 10%, in 2017 the rate fell to 38%. However, ULI points out the increasing trend of foreign capital entering Europe from investors from other continents, notably Asia. Ms. van Doorn concluded by saying that the proper distribution of population is good for everyone and positively affects housing prices, return on investments and carbon emissions.
Later in the evening an executive panel was convened, moderated by Ms. Rachel (Rocha) Lavine, CEO of Gazit-Globe, during which the effects of the urbanization process and economic trends on real estate investments were discussed. The panel included Dr. Peter Linneman, Principal of Linneman Associates and Founder and CEO of American Land, Mr. Joe Azrack, Principal Owner of Azrack & Company and a senior adviser to Apollo Global Management, one of the largest real estate investment companies in the world, Dr. Christian Schede, Managing Partner of Greenberg Traurig Germany, and Dr. Efrat Tolkowsky, CEO of Gazit-Globe Real Estate Institute at IDC Herzliya.
Ms. Lavine opened the panel by saying, "We have identified urbanization as a major phenomenon that we strongly believe has a significant impact on the retail world. We are therefore focusing on investments in big cities and increasing our investment in the acquisition and development of urban properties". Ms. Lavine also noted that mass immigration to cities is one of the most influential factors affecting the real estate industry. However, other forces such as economic uncertainty, globalization, social changes, and particularly technological changes, have a material effect on the way we live, work and do business. "We live in an age where the only thing that remains consistent is constant change." she said.
Dr. Efrat Tolkowsky said, "The field of real estate has been left behind in every dimension of innovation. It is a very significant percentage of the GDP of the countries in the world and yet it has been neglected in terms of innovation, from planning to implementation. Moreover, real estate is one of the main causes of inequality in the world. Entrepreneurship and innovation are critical to reducing the spatial inequalities leading to the rich living far away from the poor. Israel is a country the size of a large city that is not optimally developed, and is not a developed country. London, for example, has the same number of people living on less than one tenth the area and gives its residents eight to ten times more public transportation infrastructure. Israel is one of the only countries in the world trying to create population distribution, but on the other hand, has no supporting public infrastructure.- This policy is completely opposite to the trend of world urbanization."
Dr. Christian Schede referred to Berlin’s attractiveness and its similarity to Tel Aviv. "Berlin and Tel Aviv are attractive to young people from all over the world who want to start a technology or Internet business, and the real estate industry will profit from this. Berlin, along with London and Paris, is one of the major real estate markets in Europe and ranks first in investment and development. This combination creates a strong foundation that makes Berlin the preferred European capital for the development of smart buildings and sustainable urbanization. Large cities in Europe, and Berlin in particular, offer promising opportunities for Israeli investors in real estate and technology, two sides of the same coin that lead to economic growth."
Mr. Joe Azrack discussed investment opportunities in different markets and said that in big cities there are currently opportunities, especially in areas outside the city center but still close to it, in neighborhoods that are in the process of change and development. He mentioned examples including Queens, Staten Island and Brooklyn in New York, and East San Francisco on the West Coast.
Dr. Peter Linneman noted that the urbanization trend has gained significant momentum in recent years in developing countries in Africa and countries such as India and China, in cases where the infrastructure is not sufficient. In the western world, he observed, the infrastructure level is defined as being in a good enough condition for the expanding trend.
