Nine summers have passed since Tel Aviv’s Rothschild Boulevard became the epicenter of the 2011 social-justice protests and symbol of the struggle. The sycamore-studded park that runs down the center of the long boulevard was turned into a giant tent city decorated with the effigies of tycoons. The air was filled with calls for social justice and affordable housing.
Today, Rothschild Boulevard is a different place. The protestors have been replaced by the techies who work in the many startups that line the streets. The homes of the young couples and middle-class residents who used to live there have given way to luxury housing, boutique hotels and glittering towers.
The new Rothschild was symbolized by a giant deal announced a few weeks ago between the Tidhar real estate group and Ziv Aviram, the co-founder of the auto-tech company Mobileye that was sold to Intel for more than $15 billion in 2017. The two will be 50-50 partners to develop a 42-story luxury apartment tower on Rothschild 10 at a cost of close to $300 million.
Aviram isn’t the only one betting on the boulevard’s high-end future. Four other projects of the same kind are in various stages of development designed for 600 apartments plus hundreds of thousands of square meters in commercial and hotel space. Apart from the former site of the Tel Aviv Stock Exchange, which is designated for a few score units of affordable housing, the rest is luxury.
“More than a decade ago, Rothschild felt like it was part of regular Israel. Young people who were working as waiters could live there. Today, you can’t do it. Rothschild has taken on a new color and the creative class is no longer part of the landscape,” said Tomer Chelouche, an urban expert who leads tours of Tel Aviv.
“It’s been a while since the area could be a home for the people who once lived here. The same thing seems to be happening in other places around the city. Tel Aviv’s character may remain young, even with the way it’s been developing, but it seems that it belongs only to the ‘right young people,’ those who earn at least 15,000 or 20,000 shekels a month,” he said.
Home prices on Rothschild tell the story in numbers. A decade ago an entire apartment building on the street could sell for $2 million, said Roi Haroosh, the co-CEO of the real estate agency Anglo-Saxon Tel Aviv. “And today? The numbers are sky-high.” Apartments in an older building that has been upgraded to include an elevator and parking can sell for 60,000 to 70,000 shekels a square meter. In the new towers, units sell for 70,000 to 80,000 or more, he said.
Rentals are also expensive, running between 100 shekels a square meter in an older building to 150 shekels in a restored building with parking and elevators. Rentals in the luxury towers are even more.
“But even if the prices are high, demand in the area is high, too. Recently we rented a 250-square meter apartment in a preserved building in less than a week for 25,000 shekels a month. We didn’t even have time to put up a ‘for rent’ sign,” said Haroosh.
Right now, Rothschild and Herbert Samuel Street on Tel Aviv’s beachfront are the two hottest locations in the city, said Tzahi Hagag, chairman of the property developer Hagag Group. “For several years already, prices on Rothschild have been among the highest in Israel. I don’t know if they have any more room to rise. The way Rothschild has been going in recent years, it seems to be attracting fewer and fewer families and more singles with money and wealthy retirees who want the city experience.”
There’s a large gap between the calls for affordable housing on Rothschild and the realities of the real estate market that have developed since 2011. The high prices that have characterized the center of the city are radiating out to more distant neighborhoods, forcing young people and middle class families out and raising serious questions about whether Tel Aviv can remain a diverse urban and vibrant urban center.
Not everyone believes that there needs to be affordable housing in areas of high demand. A few weeks ago Yair Pines, the director general of the Housing Ministry expressed the view that “Tel Aviv and Ramat Hasharon, where an apartment costs 3 million or 4 million shekels, don’t need affordable housing.” Housing Minister Yaakov Litzman’s plans follow that logic. They call for subsidizing homes in the Negev and Galilee peripheries by selling government-owned land at high prices in the center of the country. The result will be even higher prices in the greater Tel Aviv area.
“Rothschild Boulevard is perhaps a symbol, but it’s also the heart of the problem – the lack of any recognition of the need for affordable housing in high-demand areas, which are concentrated mainly in the center of the country, Tel Aviv and Jerusalem,” said Ori Ettinger, manager for policy promotion at Tel Aviv University’s Israel Affordable Housing Center. “For middle class households, there are fewer and fewer housing options in these areas. These are places where there are lots of jobs, the schools are good and public services are well run. Affordable housing is a proven tool for reducing social gaps.”
Ettinger said affordable housing also benefitted cities. “Cities need a middle class, professionals. In Tel Aviv, we’re seeing a shortage of teachers and medical professionals that have a hard time living here. The city needs a social diversity. It has the responsibility and obligation to its existing residents.”
In the case of Rothschild, the problem starts with the history of the area. “The Rothschild revolutions started in the 1990s,” explained Tami Gavrieli, a former strategic planning director for the Tel Aviv municipality. “Until then, Rothschild Boulevard was something completely different. The main business district, which had been the traditional home for banks and financial service companies since the founding of the state, was neglected and grey. It had none of the retail activity or vibe you see today.”
The great awakening
In the early 1990s the city allowed the first office towers to be developed in the area and that began the awakening. The banks and big companies that had been planning to leave the area decided to remain and shops, cafes and restaurants began opening at street level. In the beginning, the re-zoning that had allowed for towers was meant for offices only, but over time pressure from builders got the city to begin allowing apartment towers, too.
“This has attracted a certain segment of the population in recent years that wants a lot of space and is willing to pay for it. It created a situation exactly the opposite of the wide range of housing that the city wanted,” said Gavrieli. “Apartment towers in a place like this is no advantage to the city, only to the developers.”
A spokesman for Tel Aviv said its policy remains to ensure there is affordable housing all over the city and pointed to its role in developing the Ganei Shapira project.
“The city aspires to create [housing] solutions for the entire city, including the Rothschild area,” the city said in a statement. “We’re looking at ways to overcome the obstacles created by the street’s [high] average rents, which prevent us from subsidizing them, as well as management fees that can run into hundreds or even thousands of shekels a month.”
Nevertheless, since 2005 a series of these have been constructed along Rothschild, including the luxury Meier on Rothschild developed by Berggruen Residential and the Hagag-Cohen group and the Rothschild 1 Tower developed by Habas. Others include Rothschild 17, developed by Israel Canada Limited that combined office and residential space and Rothschild 22 that was built by LR Group and the Aviv Group.
The city’s master plan had stressed mixed-use and had set a 75%-25% mix of business and residential for the historic business district together with a combination of towers, perimeter-block construction and building preservation, said Adi Avitan and Rivka Farhi, senior municipal planners. Now, the area has reached the maximum permitted building rights under current zoning rules, which means no new towers will be built.
Hotels check in
Meanwhile, two other developments have occurred on Rothschild – a changing mix of businesses and the rise of boutique hotels. Some of the banks and insurance companies have left the area, the two said, and their place has been taken by startup companies. Municipal officials were initially worried by the exodus but they have grown pleased by the tech companies that have come in. They make the area more diverse, added buzz and breathed new life into adjoining neighborhoods, said Avitan and Farhi.
But it has also turned Rothschild into a luxury office area. Oren Glazer, who heads Anglo-Saxon’s Tel Aviv’s commercial real estate business, said rents at Rothschild 22 reach 130 to 140 shekels a month per square meter. At the Africa Israel Tower, they are in the range of 100 to 120 shekels. In preserved buildings, rents are about the same, he said.
“It’s important to remember that all these are pre-coronavirus prices. It’s a big question where the coronavirus will be taking this market,” he said. “We haven’t been in the crisis enough time to talk about a drastic price drop, but in the short term I expect we’ll feel its impact. I don’t doubt we’ll feel it in rentals and when rents are hurting it’s the high end that feels it the most.”
Meanwhile, a lot of office space has been turned over to hotels in recent years, which Avitan and Farhi attributed to the uniqueness and charm of the street. It’s become a tourist attraction and developers have responded.
“Not long ago, every developer wanted to build an office building; today the trend is much more towards hotels,” said Hagag. “Hotels and apartment buildings are much more profitable and economical than offices. Rothschild’s hotel potential is great – this is the real center of Tel Aviv, the street where everything happens – the restaurants, cafes, bars.”