Gav-Yam put the crisis in the office market behind it, and recorded record results

The income-producing real estate company's operating performance accelerated in the second quarter, thanks to occupancy of projects under development - a trend that continued in the third quarter and was also accompanied by an improvement in existing assets. Quarterly operating income reached NIS 194 million. The stock has jumped 46% since the beginning of the year.

Imagination – from a promotional video by Gav-Yam (Advertising Agency Brave Branding Ltd.)

From Gav-Yam’s perspective, there is no longer a crisis in the office market. The income-producing real estate company that focuses on this market (78% of its assets) concluded the third quarter as the second consecutive quarter with a jump in operating performance. Its NOI (net operating income) reached a quarterly record of 194 million shekels.

In a report summarizing the results of the quarter, Gav Yam noted that “despite inflation, the slowdown in growth, and the war, demand was evident in most of the company’s operating areas during the first nine months of the year, which was reflected in an increase in prices, as well as an increase in occupancy rates from 95% at the beginning of the year to 97%.” This is in contrast to its previous reports, in which it noted that it managed to maintain price and occupancy stability.

During 2024 and the first quarter of 2025, Gav Yam’s rate of improvement was slow. It amounted to a quarterly increase of 1% to 2% in NOI performance compared to previous quarters, and a maximum increase of 6% compared to the corresponding periods.

However, in the last two quarters, the second and third of 2025, the real estate company, which has been managed by Natalie Mishan-Zakai since February, recorded an acceleration in performance.

The NOI in each of them increased by 4% compared to the previous quarters, and by 9% (in the second quarter) and 11% (in the third quarter) compared to the corresponding quarters.

The growth is mainly attributed to the occupancy of projects that Gav Yam initiated, which generated NIS 15 million of the NIS 20 million increase recorded in NOI (an increase of 11% compared to the corresponding quarter). The main one is located near the Hebrew University campus in Givat Ram, Jerusalem, and contains 56,000 square meters of offices.

The project (two of four buildings to be built, construction of the third has begun), which began to be occupied in May, reached 99% occupancy in the quarter, and is expected to generate annual income of NIS 47 million per year.

Furthermore, Gav Yam benefited from a 6% increase in NOI from its identical properties, which were also rented in the corresponding period. This is thanks to the impact of the index on rental prices, and an increase in rents in the new contracts that were signed. A total of 49 contracts with an average real increase of 5.4% in rent.

The projects under development are set to continue to add to Gav Yam’s performance in the coming quarters. Two properties, in Rehovot and Be’er Sheva, are nearing completion of construction and are set to begin occupancy within a few weeks.

The property in Rehovot, which is 24,000 square meters, has already been fully leased and is set to generate annual income of NIS 15 million. The property in the Negev, which has 15,000 square meters, has reached 50% marketability. Nvidia rented 3,000 square meters in it during the third quarter and is expected to occupy it during the first half of 2026.

In the main project in the initiative, ToHa2 in Tel Aviv, which Gav Yam is building with Amot (50:50), which has 156,000 square meters of office space, Google remains the unit’s tenant for the time being. This is after signing an agreement in June 2024 regarding 38% of the rental space.

The project is expected to generate annual income of NIS 150 million at full occupancy (after its construction is completed at the end of 2026), about half of the expected income from all projects in the initiative.
The improvement The quarterly NOI also affected FFO (free cash flow from operations), the standard measure for assessing the profitability of income-producing real estate companies. This is because it neutralizes one-time variables such as revaluations. FFO increased by 7% to NIS 110 million.

Positive revaluations of NIS 68 million, mainly due to the impact of the index, led to a quarterly net profit attributable to shareholders of NIS 90 million, compared to NIS 42 million in the corresponding quarter.

In the first nine months of 2025, NOI increased by 9% to NIS 560 million, and FFO by 5% to NIS 322 million.

Gav Yam’s main activity is income-generating real estate. In addition, last year it acquired the residential development activity of the parent company, Properties and Building. The sales rate in the two projects that have already begun marketing represents the slowdown in this market.

In the urban renewal project on Dafna Street in Tel Aviv, where 124 units are for sale and construction began this year, 44 units were sold last year, but not a single one has been sold since then.

In another project in Kiryat Ono, where 4 units were sold in 2024, one of the remaining 4 units has been sold since the beginning of the year.

Gav Yam is currently traded at a value of NIS 8.9 billion, and is the sixth largest income-generating real estate company in terms of market value on the Tel Aviv Stock Exchange – after Azrieli, Melisron, Big, Amot and Mbena. But its stock has yielded the highest return of the six since the beginning of the year, rising 46% (followed by Big’s stock with 39%). Later this month, it will distribute a dividend of 70 million shekels.