The Tel Aviv Municipality has unveiled interesting plans for Carlebach Street near the Tel Aviv Mall and the former wholesale market. The municipality recently published a guide for existing tenants in the Carlebach lot in the city center, in which it offers two proposals — extending the lease, which ends this August, and joining the "Lot Development Operation" that will grant rights in most of the area.
This is a 26-dunam (6.5 acre) lot along Carlebach Street and west of it, where several existing buildings, including the Capital Markets Tower, the Chamber of Commerce building, and more, are located. There are 150 tenants to whom the municipality leases the buildings. The current lease contract ends in August 2025, and the municipality is now approaching the tenants with a proposal to renew the lease for another 49 years — and is taking advantage of that opportunity to promote the renewal of the lot and forming a new city building plan, which will allow construction of office and residential towers in place of some of the existing buildings.
Up to NIS 30,950 per square meter
The guide published by the municipality for the lot divides the existing buildings into two: four "buildings" (each building includes several connected buildings with separate entrances), designated for demolition as part of the new plan, and two buildings — the Capital Markets Tower and the Chamber of Commerce building that will not be demolished but will undergo renovation. As for the buildings slated for demolition, the municipality is proposing payment of lease fees every seven years, assuming that seven years from today, the new plan will be approved and building permits can be issued.
Rents will increase
The rents that tenants will be required to pay will differ depending on the building, the floor, and whether the building is for demolition or renovation. The amounts vary, and the ranges of prices per square meter set by the municipality are quite wide — starting from NIS 9,900 per square meter per month in the basements of the Capital Markets Tower and up to NIS 30,950 per square meter for the commercial spaces in the Chamber of Commerce building facing Carlebach Street.
For example, the typical rent that tenants in the Chamber of Commerce building will be required to pay is NIS 17,150 per square meter. A standard office floor in the building occupies an area of 849.95 square meters, so a tenant of an entire floor in the building will have to pay about NIS 7.9 million for the renewal of the lease and another NIS 114.8 million in rent for the entire additional lease period — about 49 years. In conclusion, the tenant would have to pay about NIS 3.1 million per year.
The initial design includes four buildings facing Carlebach Street, 9-15 floors high and with a commercial ground floor, and behind them several more 30-floor towers.
The challenge: 90% agreement
The challenge for the tenants is a high threshold set by the municipality in order to join the operation: if the tenants in each building fail to achieve at least 90% agreement among all the tenants in that building, they will not be able to join the operation, and worse, their lease will be canceled, and they'll be evicted from the building.
The Tel Aviv Municipality said it's "not obligated to renew the leases. The requirement for the consent of at least 90% of the tenants is a factor of seriousness, within which the municipality is prepared to renew the contracts and on the condition that each tenant joins the renewal, which will also allow future planning trends to be realized.
"A 90% agreement allows the municipality not to discriminate between different tenants, between those who join, and those who have not yet decided. The municipality additionally wants a guarantee regarding a full renewal and not just with some of the tenants."