The country's real estate sector also has remained strong—and largely untouched by fallout from the subprime crisis that has hit many other markets. Rents for prime office space in the Tel Aviv area rose by nearly 40% in 2007, and while that's expected to slow this year, analysts still expect gains of 10%-15%. "Our occupancy rate is approaching 100% and we've got a long waiting list," says Arnon Toren, CEO of the Azrieli Center, the largest office complex in Tel Aviv. The situation is much the same at other major office blocks in Israel's financial capital. A leading Tel Aviv real estate company searched for nearly six months to find suitable premises to house the Israeli operations of two leading foreign investment banks.
Commercial real estate has been almost as strong and shows no signs of any letup. Few, if any, vacancies are being reported at any of the country's dozens of shopping malls, and rents are continuing to rise. The sole exception is residential housing, where prices have stabilized, particularly at the high end. The main reason is a sharp decline in the number of foreign buyers, who have previously driven up prices of luxury properties in Tel Aviv and Jerusalem.
