Search and Hit Enter

Israel’s stores reopen, but retail sector will take years to recover from closure

Street-front stores opened for business on Sunday as lockdown rules were lifted after six weeks, but it will take three to five years until commercial areas return to their pre-coronavirus level of activity.

A quarter of Israel’s 40,000 downtown retailers have gone out of business and it will take time before their empty shops are filled by new merchants.

Mom-and-Pop stores have been hit the hardest.

Stores that opened on Sunday reported strong sales of up to three times a normal day. But owners said the big increase was a one-time event due to pent-up demand and couldn’t make up for all the losses they ran up during the lockdown.

“Sales were good today, but it will take years to make up all the losses of the last few months,” said Elinor Schreiber, who owns the Elinor boutique on Ahuza Street in Ra’anana. “During the first lockdown I took a bank loan of a few thousand shekels. I spent hundreds of thousands on buying a summer collection that stood unbought in the store. From the government, I got only 25,000 shekels.”

A single mother of two who has had the store for 17 years, Schreiber decided not to work on Sunday. “Opening today is both exciting and sad,” she said. “I went through two very difficult months, without work. I didn’t sleep. Every moment I spent trying to find creative ways to generate sales so as not to crash, whether it was by uploading Facebook posts, making deliveries and other things. Today I just collapsed. I took back two employees from unpaid leave and decided not to come to the store so I could breathe for a moment.”

Store owners say they don’t have much faith in the local or national government doing anything to help them.

“I’ve lost any confidence in the government. I’m desperate. They don’t pay any attention to us because we’re weak. They just don’t care,” said Oded Babai, 57, who owns a store called Como Fashion on Tel Aviv’s Jaffa Street. “It looks like I’ll be closing my business this year.”

Babai had harsh words for Health Minister Yuli Edelstein and other politicians.

“I want to tell [Prime Minister Benjamin] Netanyahu that the peace agreement with Sudan is good but making a living is a lot better. Next time I’m not voting Likud and I’ve been a Likud man almost all my life,” he said.

A survey by the market-research firm Czamanski Ben Shahar for TheMarker provides a barometer for how deep the crash has been for downtown retailers.

It found that commercial rents have fallen in many cities between 20% and 40% as landlords struggle to find new tenants. Among the shopping streets that have suffered the biggest drops, Tel Aviv’s Dizengoff has seen average rents fall to 175 shekels (about $52) a square meter from 275 shekels (about $82) pre-coronavirus.

Until the pandemic struck, landlords along most of Dizengoff were able to collect premium rents. But the halt to tourism, depressed economic activity and the fact that a quarter of commercial property is occupied by cafes and restaurants – which remain closed – have left their stamp on the area. Other major commercial streets, such as Ibn Gvirol and Rothschild – have been hurt, too, but not as badly.

In Haifa, Herzl and Moriah streets have suffered badly, with rents falling to a range of 75 to 125 shekels [$22 to $37] on average from 187.50 to 225 shekels [$56 to $67] before the pandemic.

“These are two streets the municipality left to their own devices even before the crisis,” said Tamir Ben-Shahar, the firm’s CEO. “Now the coronavirus has completely destroyed them, perhaps permanently. When you drive or walk down Moriah Street from Ahuza Center to the Carmel Center, you see more closed shops than open ones.”

On Jerusalem’s Jaffa Road, which has also been battered by the absence of foreign and local tourism, rents have plunged close to 55% to an average of 125 shekels [$37 a square meter from 275 [$82] before the crisis.

Czamanski Ben Shahar said that the figures refer to asking prices and that many landlords are settling for much lower rates and many commercial spaces have no takers at all.

That squares with what commercial property dealers in Tel Aviv and Jerusalem have been reporting in recent weeks that since the start of Israel’s second lockdown September 18 they often haven’t been able to sign contracts at any price.

Apart from the problem of the continued economic downturn and the absence of tourism, many workers remain either on unpaid leave or are working from home and are doing less shopping than they had before the first lockdown last spring. Even though limits on how far people can travel have been ended, the streets are filled with fewer pedestrians.

Street-front stores are suffering more than their peers in the shopping malls (which remain closed for now).

That’s because 80% of them are small businesses with very limited financial resources and only 20% belong to big chains. In the malls, the chains account for 90% of store space.

The chains and the big malls spend heavily on advertising and have extensive online operations.

“While in Israel we’ve seen a lack of municipal economic leadership, elsewhere in the world, major cities have closed streets to vehicular traffic and turned them into pedestrian areas, allowed in food trucks and have made them into entertainment centers with street performances,” said Ben-Shshar.

“In Israel, almost nothing like that has been done. Tel Aviv has done a little, turning some streets into pedestrian areas, like the Levinsky Market. Ramat Gan and Jerusalem have done similar things,” he said.

Czamanski Ben Shahar said that if the cities want to revive their downturn, they will have to turn streets into a meeting place with activities to lure shoppers and others, such as open-air markets, art galleries, pop-up shops and the like. Links between downtowns and residential areas need to be improved with bicycle paths and walkways and ensure that enough stores are located in a concentrated area.

In some areas, commercial rents have held steady despite the crisis.

On Ahuza Street in Ra’anana, for instance, have remained unchanged because nationwide chains account for 39% of all the stores in the street, compared with 18% for Jerusalem Jaffa Road and 16% on Tel Aviv’s Dizengoff Street.

In addition, Ra’anana residents are wealthier and have been less affected by the coronavirus crisis.

Other retail areas to remain largely unshaken by the downturn are Herzliya’s Sokolov and Ben-Gurion streets – the first because it has a relatively high ratio of shops to cafes and restaurants, the second because of the limited commercial space available.

Source: Adi Dovrat Meseritz – HAARETZ