The Marker, Adi Cohen, 05.10.2020

Although the office industry is in crisis and uncertainty, and data from planning institutions indicate over-planning in this market - it seems that the high property tax revenues of income-producing real estate continue to incentivize local authorities to plan millions more for employment, without taking into account regional and national demand. A huge plan currently being promoted by the Netanya Municipality and reached by TheMarker seeks to add about 12 million square meters to employment - an area that, according to the Planning Administration, is equal to all the office space built in the entire Tel Aviv district.

The plan, which was submitted for objections in February, was formulated by the Netanya Municipality subject to the Central Outline District Outline Plan, which defined five metropolitan employment centers secondary to the district - including Petah Tikva, Rishon Lezion, Ramla, Rosh HaAyin and Netanya. The plan that was submitted initially included about 8.2 million square meters of employment, along with about 1,600 new housing units. The planned employment area covers about 5,000 dunams - between Road 57 in the north, Coastal Road in the west, Road 553 in the south and Kiryat Hasharon in the east.

In recent weeks, however, the Netanya municipality has filed an objection to a plan it is promoting, in order to increase the original areas, and asked to add about 4 million square meters. The municipality's opposition and the attached economic opinion indicate that it is necessary to increase urban development. In the coming decades - in a way that will ensure the maintenance of the economic strength of the city.

" The metropolitan employment area in Netanya will be a key element in determining the city's development in the next three decades and in positioning it as a significant metropolitan employment area in the area between Haifa and Tel Aviv - being the city's main growth engine," the statement said. The municipality noted that currently, for every housing unit added to Netanya, the municipality suffers a deficit of about NIS 1,260 from its coffers, and that the requested additional office space will support the city's growth forecast for 1945 - about 70,000 new housing units to be built in its area.

We emphasize that the total of the aforementioned housing units, about 12,000, are included in an umbrella agreement signed by the Netanya Municipality in 2016 with the Israel Land Authority and the Ministry of Finance - which promised that Netanya will receive a budget of NIS 800 million for infrastructure and public institutions.

The design is detached from the field

The grandiose plan, which, as mentioned, is already being promoted on the table of the Central District Committee, once again emphasizes the need for national, long-term planning for employment areas in Israel - and the disconnection of planning from what is happening on the ground. Disconnection resulting, among other things, from the distortion inherent in property tax rates - which dictates a deficit income for the authorities' coffers with regard to housing.

In Netanya Municipality argue that the program significant addition is needed because of the assumption in fact less than half of these areas will be realized. According to the municipality, the actual built-up areas actually amount to about 6.5 million square meters - and constitute an addition of only about 4.7 million square meters to the built-up areas in its area today.

But in order to reach the said real increase, the municipality explains that "an additional planning potential of 2-3 times these rights is required." The expected low realization, according to the municipality, stems, among other things, from the increase in ownership of the various plots in the city intended for employment - and from the changing economic viability between the complexes.

However, the clear economic motive behind Netanya's huge program, as mentioned, is not unique to it - and it largely reflects the distortions in the existing method of distribution of income to the local authorities' coffers. Currently, the total area of ​​real estate that yields in the area of ​​the authorities - sweeping to their coffers a property tax rate 3-5 times higher than the residential property tax - is a significant component in their financial strength, and determines their development capabilities and level of investment in residents.

IKEA complex near Netanya Photo: Ofer Vaknin

For example, in a survey conducted by the economic consulting firm Czemanski Ben Shahar, it was found that in order to cover the current expenses of the municipalities for each resident added to their area, an average increase of 20-25 square meters of income-producing real estate is required. At the national level, according to the review - this is a required annual addition of 2.5 million square meters.

But in the planning institutions the numbers are completely different. Data revealed last year by the Planning Administration's strategic plan for 2040 already indicated an excess of planning supply of income-producing real estate in Israel - of about 240 million square meters.

The Planning Administration also now openly testifies to the considerable saturation in the office market , whose planning has been dictated and based over the years on the economic need of local authorities - often detached from the possibilities of realization and demand for these areas. In practice, according to the data, the average rate of realization of employment areas in Israel reaches only about 1.8 million square meters per year.

And what about moving to work from home?

Moreover, the state of the office market has deteriorated greatly in recent months and there is a great deal of uncertainty about its future the day after the corona. Since the outbreak of the plague, the office industry has been marked as one of its main victims - with the mass abandonment of tenants, a fall in rental prices and a collapse in the share prices of the major construction entrepreneurs in this arena.

Meanwhile, the players in the industry seem to maintain optimism and continue to build and plan the office space as usual. But there are growing speculations that the crisis will change the labor market and reduce the demand for offices.

The Netanya Municipality responded: "In recent years, the Netanya Municipality has been cooperating with the District Committee and the Israel Land Authority to approve a comprehensive master plan for Netanya's Employment Area, Net / 1000. Of housing units in its area.

"The ratio of employment areas to the peri-urban population in Netanya is low and the trend reversal is necessary for the city's further development. Many of the program complexes are urban renewal areas and often include the need to demolish existing buildings and build new ones in their place.

The municipality also notes that beyond the proximity of the complex to major national transportation routes, plans are being promoted to improve accessibility to this complex - including the planning of another train station nearby, and the establishment of a network that includes nine lines, most of which will pass within the plan.

The District Planning and Building Committee Central in the Planning Administration stated: "We are in the midst of hearing the objections to the plan. We are unable to respond prior to the committee's decision on all issues raised before it, including the scope of rights."