Office Vacancies Rise in Airport City as Tenants Relocate to New Business Parks
The relocation of major firms from Airport City to newer business parks highlights rising vacancy rates and rental pressures in outer Tel Aviv office markets, contrasting with strong logistics demand.
Diplomat, a major import and distribution company operating in Airport City for over two decades, announced last week that it will relocate its corporate headquarters to the Naimi Park at the Mesubim Interchange. Simultaneously, its 30,000-square-meter logistics center will move to Caesarea. This relocation comes roughly a year and a half after technology firm Audiocodes also vacated Airport City for Naimi Park, leaving its former premises vacant.
The departure of two long-standing tenants raises questions regarding office demand in Airport City and the outer rings of the Tel Aviv metropolitan area. Specifically, it highlights whether regional business hubs are struggling to attract tenants despite ongoing investments in accessibility and infrastructure.
Declining Occupancy Rates
As of the end of 2025, Airport City contained approximately 329,900 square meters of built space, of which roughly 286,000 square meters were actually leased. The complex comprises nine office buildings, with an occupancy rate standing at 73.4%, compared to 98.1% for commercial spaces and 97.4% for industrial and storage facilities.
These figures align with broader trends in the office market outside Tel Aviv. According to a Newmark Natam market review for the first half of 2026, property owners face an oversupply of newly introduced office spaces, eroding rental values in secondary properties outside central Tel Aviv. In the Modiin and Ben Gurion Airport periphery region, occupancy dropped from 85.63% in the second half of 2025 to 82.09% in the first half of 2026.
Economic consultant Itai Shafran notes that the corridor between Hatifim Road, Route 40, and Route 4, along with the broader second and third rings of the metropolis in the Ono Valley, has seen extensive office construction over the years. According to statutory planning, between two and four million square meters of office space can potentially be developed in the area.
Competition from New Business Parks
"Construction initially began near the Savyon Interchange and later expanded toward Ramat Efal, South Tel Hashomer, Yehud, Or Yehuda, and other complexes, all planned around the Tel Aviv Light Rail Purple Line," Shafran explains. However, this creates a dynamic where new office supply directly competes with older structures.
"Airport City has not seen new supply built for years. Most buildings in the complex are Class B or older properties that once qualified as Class A, whereas new supply has emerged around it," Shafran stated.
Pricing further complicates the landscape. According to Airport City financial reports, rental rates hover around ₪80.5 per square meter, whereas industry sources estimate Naimi Park rates between ₪55 and ₪70 per square meter. Naimi Park also offers modern buildings, ample parking, and strategic proximity to major highways.
Resilience in Logistics
Airport City management emphasizes that the complex remains one of Israel's premier business parks. While one specific office building is currently being marketed to a single primary tenant, occupancy rates across the rest of the complex remain robust.
Furthermore, while the office sector faces headwinds, the demand for logistics facilities remains exceptionally strong. Airport City noted that it received countless inquiries from companies eager to lease the space vacated by Diplomat, underscoring the enduring appeal of the location's proximity to Ben Gurion Airport and major transport arteries.
