Israeli businesspeople, companies, and institutional investors invested USD 2.3 billion in overseas real estate in 2022
Yariv Ben-Ari, Herrick partner and co-chair of the firm's Israel Practice and the Real Estate Hospitality Group, spoke with Israel Desks about why, despite global economic uncertainty, Israelis continue to invest in real estate overseas.
What do you attribute this to?
Yariv explained, "Historically, Israeli capital has been very opportunistic. Given the growth of relationships between Israeli investors and their US partners over the last decade or so, these relationships have allowed Israeli capital to reach quality assets in prominent locations and other opportunistic investments." Yariv added, "While most institutional capital wasn’t exposed to the prior recession because they hadn’t yet significantly invested in the US, after going through a learning curve that included a decade or more of investing and then adjusting for COVID-related scenarios, Israelis have reached a higher level of comfort in US investing. We also attribute the growth to the uncertainty in Israel that has been going on for months given the political environment. Notwithstanding the current economic environment, the US is still a stable investment target."
Which are the real estate assets attracting the most interest?
Yariv noted, "We are seeing a significant increase in the hospitality industry, particularly in the luxury sector and the extended stay sector. Luxury hotels are consistently sought after, but it’s no surprise to see brands such as Marriott and Hilton, as well as Airbnb, increasing their inventory of extended stay brands for a few converging reasons. Perhaps the most significant are the current economic realities – including a high-interest rate environment and significantly-reduced lending options – with these less costly assets allowing for reduced development costs for sponsors, even amid an economic slowdown. The continuation of "work from home" and "home away from home" trends make these properties more attractive to a broader swath of visitors. Reduced fees and development costs naturally lead to higher profitability for these developers and longer stays with more, albeit reduced, fees for the brands."