Israel's high-tech market is a dynamic force, often serving as an indicator for the overall economy. When the high-tech sector prospers, it fuels economic growth, attracts foreign investments, and stimulates job creation. Conversely, downturns in the industry can have substantial consequences as the tech sector generates a considerable portion of the country's financial resources is developed in the high-tech sector and it accounts for 11.9% of the workforce.
Changes in interest rates can significantly impact technology companies, especially those that have borrowed funds for expansion or operational purposes. After nearly two decades of relatively low interest rates, a sudden increase can strain companies that are now grappling with the challenge of repaying loans under higher interest rates. To offset financial pressures, high-tech firms resorted to laying off employees and disposing of surplus office space they had previously leased to accommodate anticipated growth.
When high-tech companies downsize or dispose of office space, the space returns to the market as sublease if landlords hold tenants to the initial lease commitment. Subleasing provides a practical solution for businesses facing financial obstacles or shifting expansion strategies. By subletting unutilized space, companies can generate additional income while optimizing their resources.
The subleasing market operates differently from the traditional real estate market in terms of pricing, lease duration, and general conditions. Subleases offer an opportunity for organizations to access prime office locations at cost-effective terms. The lease period allows subtenants flexibility and opportunity to reassess space requirements. When the economic uncertainty continues, subletting allows companies to optimize their real estate strategies, generate revenue and maintain control over the growth plans in order to create a win-win solution.
AUTHOR
Miki Mikunis
Capital Markets Analyst
Capital Markets Department
