Israel Targets 27,000 Homes in Stalled Office Projects

Israel is accelerating efforts to add housing to stalled office and employment developments. A special planning committee is now working with sites that could potentially accommodate at least 27,000 homes: about 7,000 units are included in 10 plans already under discussion, while another roughly 20,000 have been identified across 15 sites at earlier stages. The figure represents planning potential rather than approved or guaranteed construction.

Around 27,000 homes are in the planning pipeline

Israel established a special planning mechanism for converting employment land to residential use in 2022. Progress was initially limited as municipalities resisted losing potential office developments and the committee largely responded to applications brought by landowners.

Its approach has changed over the past year. Planners are now actively identifying large sites where approved office developments have remained unbuilt for years and working with municipalities on new combinations of housing, offices and retail.

Around 7,000 homes are included in 10 plans already being discussed. Another 15 sites have been identified with estimated potential for roughly 20,000 additional units.

Ynet, citing Calcalist, reports that the committee is increasingly pursuing mixed-use development rather than simply replacing every planned office with housing.

The 27,000 figure therefore should not be treated as an approved construction programme. Many of the sites remain at an early stage and their eventual housing capacity may change.

Givat Shmuel is the most advanced test

The most advanced project is at the Amitech complex in Givat Shmuel, next to Highway 4 and the Givat Shmuel interchange.

The Ezri Group previously held approval for about 52,000 square metres of offices at the site but never developed them.

The revised proposal calls for two 32-storey towers containing about 400 apartments above five floors of offices and retail.

Half of the homes would be micro-apartments of roughly 50 square metres, aimed largely at smaller households.

The plan is approaching the formal deposit stage. Its development has also been helped by a nearby infrastructure proposal to put a section of Highway 4 between Bnei Brak and Givat Shmuel underground, potentially releasing surface land and changing the area's urban layout.

Givat Shmuel illustrates the intended model: an office project that failed to become economically viable is redesigned as a mixed-use scheme rather than simply abandoned.

The committee is focusing on large transit-oriented sites

The revamped committee has narrowed the type of land it wants to handle.

Its general focus is on strategic sites of at least 50 dunams, equivalent to about five hectares. The threshold falls to around 15 dunams for land near light-rail stations or planned metro stations.

Priority is also being given to sites next to existing residential neighbourhoods and locations where major infrastructure obstacles are unlikely to prevent construction for years.

That strategy is particularly relevant in central Israel, where large undeveloped sites are scarce and future housing increasingly depends on more intensive use of already planned urban land.

Municipal finances slowed earlier conversions

Local government economics were one of the main barriers to the programme.

Offices and retail generally generate substantially more municipal property tax, known as arnona, than housing. New residents also create additional costs for schools, kindergartens, roads, parks and other local services.

A municipality can therefore have an incentive to preserve an office designation even when a developer sees little chance of building the project profitably.

The current strategy relies more heavily on agreements with local authorities. Instead of removing all employment uses, plans can retain offices and commercial space while adding apartments that improve the economics of the overall development.

The committee has also been authorised to operate through the end of 2029 and can now consider converting land designated for commercial development as well as employment uses.

Israel does not have one uniform office market

The programme does not imply that office demand has disappeared across Israel.

Prime buildings in Tel Aviv's central business district continue to attract tenants. Pressure is stronger in suburban and less accessible business areas, where occupiers are increasingly selective about transport connections, location and building quality.

At the same time, the development pipeline remains large. Cushman & Wakefield Inter Israel estimates that more than 1 million square metres of office space is planned for delivery along the Ayalon Corridor between 2026 and 2031. About 394,000 square metres is currently scheduled for 2027 alone, the largest annual volume in the present cycle.

The market can therefore support strong occupancy in its best buildings while still carrying surplus planned space in locations where the original business case no longer works.

The conversion initiative is primarily aimed at the latter category.

The housing market also has substantial inventory

The rezoning push comes at a time when Israel's housing market itself is carrying a large supply of unsold new homes.

At the end of June 2026, about 84,280 new homes remained for sale, equivalent to approximately 26 months of supply at the prevailing sales rate.

Tel Aviv District accounted for 30.2% of the unsold stock and Central District another 24.4%, meaning the two districts together held more than half of the national inventory.

Prices also remain below year-earlier levels. Data released by Israel's Central Bureau of Statistics on Sept. 15 show that dwelling prices rose 0.2% in June–July compared with May–June, but remained 1.2% lower than a year earlier. New-home prices were down 0.8% year on year.

That makes the conversion programme less of an immediate response to a shortage of homes for sale and more of a long-term land-use strategy.

Most of the potential units would take years to move through planning and construction.

Housing can revive stalled land

Office and residential development have different financial models.

An office project works only when expected rents justify land, construction and financing costs. Where too much competing office space has been planned, a landowner may hold an approved scheme for years without starting construction.

Housing provides a different source of demand and can be sold unit by unit. Adding residential space can therefore make a dormant project financially viable.

Rezoning alone does not guarantee development. Residential construction is also exposed to financing costs, market demand and infrastructure requirements.

The Bank of Israel cut its policy rate to 3.25% on Sept. 1 but noted that the stock of unsold homes remained high. Transactions increased moderately in May and June, particularly for new dwellings.

Each conversion will therefore still have to demonstrate that the revised project can support financing and sales.

Mixed-use planning reduces another risk

The committee's shift toward mixed-use development is significant.

Keeping offices and retail alongside apartments can preserve employment in areas where the state is investing heavily in public transport and reduce the risk of creating residential districts separated from workplaces.

It also protects against a different long-term problem. If every weak office project were converted entirely to housing, cities could eventually find themselves short of suitable employment land once demand changes.

The current approach is instead intended to identify office plans that have little realistic prospect of being built while preserving commercial uses where they remain economically justified.

The 27,000 units will not arrive at once

The early years of the programme demonstrated that a planning designation is only one part of the development process.

Projects still need detailed plans, municipal and infrastructure approvals, building permits and financing. Years can pass between identifying residential capacity and completing the first homes.

That makes it misleading to compare the entire 27,000-unit pipeline directly with one year of housing sales or construction.

Around 20,000 of the potential homes are still attached to newly identified sites at an early planning stage.

The more meaningful measure of the committee's performance will be how many developments progress to approved plans, building permits and construction starts.

As experts at International Investment report, the programme offers a way to reactivate urban land where the original office model has lost its economic rationale. The headline figure of 27,000 homes, however, describes land-use potential rather than future completions. There is also already a substantial inventory of unsold new housing. Location, transport access and project economics will therefore matter more than the total number of apartments shown in planning documents. If the committee succeeds in unlocking genuinely stalled sites around major transport corridors, the local impact could be much more important than the national headline number suggests.