• The financial system in Israel is exposed more to the commercial real estate industry than to any other industry in the economy. In our estimation, the total credit provided to the industry in Israel is NIS 140 billion, which constitutes about 16 percent of total credit to the business sector. About NIS 100 billion of that was provided to public companies whose financial stability we analyze, and most of this amount was provided as tradable corporate bonds (which constitute 35 percent of the corporate bonds in Israel, excluding banks and insurance companies).
  • The total square meterage of commercial assets grew by about 3 percent annually, on average, from 2009 to 2017 and that growth was concentrated in assets used for offices and retail. At the same time, the fair value of commercial property grew significantly although this increase was more moderate than that in the value of residential real estate. Retail properties constitute a significant share of the fair value of total commercial property, also in comparison to other countries.
  • The profitability of the public companies in the commercial real estate industry is based to a large extent on revaluation profits. They accounted for about 46 percent of the pre-tax profit of all the companies according to the annual average during the period 2010–17.
  • Between 2009 and 2017, the commercial real estate companies improved their financial profile. Since 2011, there has been no major change in their total financial debt, even though cumulative revaluations grew over time.
  • Between 2009 and 2017, the commercial real estate companies that were delisted had an inferior financial profile relative to companies that remained listed on the TASE. Of 19 companies that were delisted, the reason in the case of 10 of them was debt restructuring proceedings.
  • Between 2009 and 2017, investment in commercial property abroad dropped significantly, although it became more geographically dispersed. The significant drop in holdings in advanced economies partially offset the growth in holdings in less developed regions.
  • Since the financial system is exposed to commercial real estate and since the industry has played a significant part in various financial crises, it should be monitored. However, since there is a shortage of data (such as property prices, the vacancy rate and rent per square meter), the trends in the industry can only be analyzed after the fact and on the basis of financial statements. This hinders the effort to identify emerging systemic risk in a timely manner.​