ISRAEL RETAIL MARKET REVIEW 2021
Growth and Development of Retail in Israel
Anna Klaiman • 14/02/2022
Israel - so well-known for its high-speed development of start-up businesses - is a small country of 9.2M people with one of the highest private consumption per capita in the world.
The Israeli retail market is exceptionally recognized since the country is in its exciting progression as it continues to move upward, currently standing at number 19 on the list of the world’s top 20 economies based on GDP per capita.
Here are some important highlights from the 2021 Retail Review:
+ 15% Retail turn-over compared to 2019
6,000 USD PCE per capita average in 2021 (hitting its record high)
- 98% occupancy rate in retail real estate
+ 10.6 % housing prices increase
+ 10 international brands entering Israel in 2021
200 sqm of retail space per capita
As we review the numbers today, we look back at the beginning of 2021 when it was difficult to be positive entering the lockdowns. The year 2021 brought uncertainties, fears, opportunities, and success!
Israel was being carefully observed by countries all over the world during 2021 due to its first and successful vaccination campaign and being the first country to come out of the lockdown series right before the spring shopping season. Interviews and reports from top managers of Israel's main developers spoke about the spring sales they have not seen for many years.
Israeli retail is not that dependent on tourism however. Therefore, when met with flight restrictions and lockdowns, it brought an unprecedented demand within local consumption. Not only online sales boomed, but local stores enjoyed an abundance of customers this year. Local brands and franchises had to keep up with the rising shopping demands of their customers. Among the success of local businesses, the hotel industry is an interesting example. As the country closed to tourists for more than a year, Israel surprisingly announced three times more sqm for the development of new hotels in 2021 than what was delivered in 2019.
A NEW LUCRATIVE LOCATION FOR EXPANSION
2021 started off with some exciting news of Victoria Secret arriving to the Israeli market, putting Israel on the list of most lucrative development locations.
Israel has been advancing in retail growth for several years now. Already from 2017 to 2019, Israel became one of the main targets in the global expansion plans of many international brands.
The expansion to Israel did not slow down in 2021 – we welcomed the announcement of a dozen new store openings for brands such as Dior Perfume, Victoria’s Secret, Bath & Body Works, Jumbo, Flying Tiger, All Saints, & Other Stories, Petit Bateau, Scotch and Soda, 7 Eleven, Lego, Tesla and many others.
Having a 2.4% share of millionaires in the adult population with this number rising every year due to the Israeli tech boom, the market creates amazing opportunities for luxury brands.
Along with Dior Perfume opening in the best possible location in Jerusalem, luxury retail has moved way forward in recent years. 2021 luxury retailers used this as an opportunity to renovate existing concepts and opened doors for new designs of Dolce and Gabbana, Saint Laurent, Dsquared2 and Moncler concepts at Israeli Kikar Hamedina.
TLV Fashion Mall
HIGH OCCUPANCY RATE IN RETAIL REAL ESTATE
Israel’s retail market is not entirely influenced by sqm of retail space per capita. Shopping habits and high consumption along with location, are accurate indicators of the market’s success and occupancy rate. It is truly a ‘landlord’s market’.
Only around 2M sqm of retail space is available which is much lower than in other developed countries. Having mainly four developers delivering retail space, very few new retail locations were delivered in 2020-2021. Looking carefully at the pipeline, we can still see that within the next 5 - 10 years demand will continue to prevail.
The new pipeline consists mainly of add-on development of existing most successful shopping locations but still does not bring the market to leveling supply and demand in retail real estate.
The transition to a relatively small number of new shopping malls planned and delivered within the retail sector has mainly been attributed to changing shopping habits, shifting from traditional shopping to mixed-use projects.
Shopping areas became an essential part of every real estate development. We can see new office towers with 3-4 times bigger retail areas compared to locations delivered before.
Retail presence has become an essential part of every residential development in Israel, elevating the market to a higher professional and innovative level. Small neighborhood malls are one of the top requested locations by Food & Beverage tenants.
As we are still studying these real estate numbers, it is already obvious that consumer habits will have a great shift to convenient shopping opportunities.
Dior Perfume store, Mamila Jerusalem, opened May 2021
WHAT’S NEXT - Personal summary
2021 was my first year in Cushman & Wakefield Inter Israel and with great interest, I have studied Israel’s local market, how exciting it was to watch shopping experiences in Israel developing, changing and innovating, overcoming difficulties and remaining positive and open to its consumers. Especially, setting local and global trends in some particular segments.
I am looking forward to what 2022 will bring, specifically, new brands entering the Israeli market as well as local companies creating new and exciting concepts. Wishing success to all retailers, developers, innovators and to all my colleagues all over the world!