Difficulties in the office market push Sela and Menivim to increase exposure to other sectors
Real estate investment trusts Sela Capital Real Estate and Menivim REIT have improved their financial performance, seeking to offset the office market downturn by investing in retail and logistics assets.
Strengthening growth engines: The performance of real estate investment trusts (REITs) Sela Capital Real Estate and Menivim REIT has improved, and they are trying to overcome difficulties in the office market by increasing exposure to other sectors. Sela is doing this through the acquisition of a shopping mall in Kfar Saba, and Menivim through the purchase of income-generating industrial and logistics spaces. The market, at least for now, is not impressed by these moves: Menivim's stock has fallen by 13.1% since the beginning of the year, and Sela's by 23.6%, compared to a 6.3% decline in the TA-Maniv Israel index, in which they are included.
Sela Capital Real Estate ended the second quarter of 2026 with a 7% improvement in its NOI (net operating income) compared to the same quarter in 2025, to 94 million shekels, and a 5% improvement in FFO (funds from operations), to 64 million shekels. FFO, which neutralizes revaluations and one-time expenses, is considered the main indicator for examining the profitability of income-generating real estate companies. Menivim, in parallel, enjoyed a 12% increase in NOI to 67 million shekels and a 15% jump in FFO to 49 million shekels. For both, the main improvement came from new assets added to their portfolios of income-generating properties.
At Sela, this is the Kfar Saba HaYeruka mall, the acquisition of which from the Shviro group it completed at the beginning of April, adding 9 million shekels to the second quarter's revenue. At full occupancy (currently reaching 93%), the company expects an annual addition of 40.5 million shekels to its NOI, which represents 11% of the NOI for the entire year of 2025. At Menivim, this concerns additional rights it acquired in several properties it already held, and the industrial and logistics spaces of Shaniv, the acquisition of which (51%) it completed at the end of March for 56 million shekels. This is part of a series of acquisitions it has made of logistics and industrial spaces, which has accumulated to 192 million shekels since the beginning of the year. In addition, it benefited from an improvement in the performance of the logistics center in Har-Tuv near Beit Shemesh, which it re-leased after a dispute with the previous tenant.
In its quarterly report, Menivim addressed the difficulties in the office sector, noting that:
"The continued uncertainty as a result of geopolitical circumstances and the security situation is mainly causing a restraint in the volume of demand for offices. The office rental market in most areas continues to be a very competitive market with limited demand."
In practice, Menivim's exposure to the office sector is lower than Sela's, and only 40% of its quarterly NOI came from this sector compared to 52% for the latter. While less than 10% of its office space is leased to technology companies, which face the main risk of difficulties, compared to 20% for the Sela REIT. However, Menivim holds future exposure to the sector in the form of 12,000 square meters of offices in the Lavanda Tower in Tel Aviv that will be handed over to it by the end of the year, an addition of 10% to its existing income-generating office space. And although it began marketing them as early as last March and the beginning of the year, and purchased a nearby parking lot to increase the property's attractiveness, it has not yet managed to lease them. Its marketing efforts suffered a blow in June after the gaming company Moon Active announced its expected departure from the nearby Vitania Tower, owned by Vitania and Delek Automotive. A departure that will add 26,500 square meters of vacant office space for marketing in the area.
At Sela Capital Real Estate, the difficulties arising from exposure to the office sector are already present in practice. In 2022, it purchased the headquarters building of Bank Leumi in Tel Aviv, Beit Mani, for 650 million shekels and expected to receive an annual NOI of 32 million shekels from it. But after the building, which has 13,400 square meters of office space, was transferred to its possession in February 2024 empty of tenants, it struggled to re-lease it, and only in recent months has the pace of leasing there begun to progress. Thus, after ending 2025 with signed contracts for 32% of its space, at the end of March the rate reached 48% and at the end of June 52%, with an additional 10% in advanced closing stages. It is still tens of percent away from full occupancy. In addition to the occupancy difficulties of Beit Mani, the company is also dealing with the departure of Mizrahi Tefahot Bank in April from the office space it rented from Sela in Beit Moshe Aviv in Tel Aviv, which it has not yet re-leased, and the loss of revenue there for the quarter reached 3 million shekels.
