In the previous edition of MAN Properties we published for the first time the MAN Index of Income-Producing Property in Israel. The index specifies relative values (not rents in NIS), and its initial point is based on a value of 100 assigned to the first quarter of 2005. The index reflects the nominal behavior of the income-producing market since 2005 to the present.

Index values are calculated by aggregating (a) the rents charged in new transactions, (b) sale prices reflected in changes in the cap rates of income from property, and (c) occupancy percentages and the supply of vacant office space in key areas of demand in Israel.

The index for the third quarter of 2009 shows an increase of 3.2% in the strength of the office market relative to the previous quarter, and a drop of about 8% over the same quarter last year.

In the previous quarter, the index showed its first improvement following four quarters of steep decline, in which it fell from its peak at 190.7 to 138, a decline of about 27%. The strengthening in the third quarter may mark a reversal of the trend and the beginning of market recovery.

The increase is due mainly to higher rent prices in Tel-Aviv, Ra'anana, and Petah Tikva, in most cases because small areas that had been evacuated as a result of the crisis have now been occupied, and to the realization of new renters that current prices represent an opportunity. In the next quarter we expect the index to continue to rise as a result of the continued trend to occupy available spaces and of slight price increases for areas in demand. We are also witnessing the beginnings of activity and demand for large areas on the part of large corporations and companies that in the last four quarters had stopped the processes of identifying new areas and are now returning to generate market demand.