Defense tech firm Rafael to vacate prime Tel Aviv real estate for new development

Thirteen dunams (3.2 acres) of prime real estate in Tel Aviv is to be freed up for residential and commercial development, including around 900 new housing units, under an agreement (Hebrew) reached between state-owned defense company Rafael and the Israel Land Authority.

The area to be re-developed lies between Hashalom and Moshe Dayan roads in southeast Tel Aviv, on the boundary with the Tel Aviv suburb of Givatayim. It has been home to Rafael’s operations since 1994.

The agreement comes amid Israel’s ongoing southward relocation of military and defense operations from Tel Aviv and other central locations to the Negev region.

The Israel Defense Forces headquarters, dubbed the Kirya, remains in central Tel Aviv opposite the Azrieli towers. However, a considerable amount of the land in the area that had been used by the IDF and state offices has been sold off for private development. Most notably, a reduction of the military footprint in Tel Aviv allowed for the construction of the Sarona Market, built on the site of the former German Templar colony at the corner of Namir Road and Kaplan Street and  launched in 2014.

The city of Tel Aviv also approved, in 2013, preliminary plans with the Israel Land Authority to build a complex called Keren Hakirya with 80-story and 50-story office towers, two 45-story residential towers providing 770 apartments, and a two-story retail mall at the intersection of Menachem Begin Road and Shaul Hamelech Boulevard in central Tel Aviv. Theos plans are still in the pipeline.

The agreement with Rafael, maker of the Iron Dome anti-missile defense systems, will see the proposed construction of about 18 buildings 7-25 stories high, as well as public spaces, parks, and shops. Rafael is expected to clear the area in five years, according to the announcement.

Israel Land Authority director Yaakov Quint said in a statement that the deal “will lead to the establishment of a residential neighborhood and an employment area” in high-demand locations.

It joins a number of other projects in Tel Aviv and its surroundings currently underway to increase building density and redevelop the urban fabric of the area. In the works are plans to revamp Arlozorov Street, a main Tel Aviv thoroughfare, and the construction of a 64-story residential tower in Givatayim that will include 500 units of one or two bedrooms designated for long-term rentals.

These plans join the continuous upgrade of existing individual buildings using the TAMA 38 framework, which allows for additional stories to be added to existing buildings, or for the demolition and rebuilding of buildings (Pinui Binui).

There is an acute need in Tel Aviv and the surrounding area for more homes, affordable housing, and long-term rental options. But projects in the city have tended to cater to the luxury market.

Tel Aviv has recently been named by the Economist Intelligence Unit as the world’s third most expensive city in which to live, down from the number one spot last year.

Tel Aviv Mayor Ron Huldai has expressed concern about the rising costs of living in the city, and the diverse city population currently being priced out.

Prices in the Gush Dan area have risen by over 20% in recent years, according to data collected by the Central Bureau of Statistics, and the average apartment price in Tel Aviv is now NIS 2,990,800 ($876,557) in Q3 2022, up from an average of NIS 2,505,500 ($734,323) in Q3 2021. The average across the country is NIS 1,931,700 ($566,151).

Huldai has to date laid the blame at the government’s door, saying that it is responsible for managing the economy in a way that shifts housing prices down.

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