Sderot Mayor: “The U.S. Is Planning a Port in Gaza – and for Sderot and the Gaza Envelope This Is a Huge Opportunity”

At a Nadlan Center urban renewal developers forum held in Ashkelon, Sderot Mayor Alon Davidi said that U.S. plans to establish a port in Gaza could present a major strategic opportunity for Sderot and the Gaza Envelope. Davidi stressed that Israel must not withdraw from the “yellow line,” while senior planning and real estate figures discussed the economic challenges of urban renewal in southern Israel, density limits, government subsidies, and the future of long-term rental housing.

By Lee Saadon, Nadlan Center

The challenges of urban renewal in Israel’s periphery, alongside questions surrounding the “day after” the Swords of Iron war, were discussed extensively at the Southern Urban Renewal Developers Forum held yesterday (Wednesday) in Ashkelon by Nadlan Center. Participants included Sderot Mayor Alon Davidi, Southern District Planner Michal Meril, Ampa Capital CEO Dudi Levy, and Ashkelon Urban Renewal Authority head Yedidya Grinwald.

According to Sderot Mayor Alon Davidi, “From my perspective, there is no real ‘day after’ in security terms. We have been living under terror here for many years. The State of Israel made the biggest blunder in its history by not listening to warnings in time, and you cannot be a mayor in the south without dealing with security issues on a daily basis. I paid a personal price for this stance with senior officials, including the prime minister, but I did not back down.” Referring to the “yellow line” (the IDF withdrawal line under Phase A of the ceasefire agreement), he added: “Israel must not give it up. It must remain in place for at least several decades, because you cannot change the murderous ideology of an organization backed by Iran in half a year.”

At the same time, Davidi sees the current situation as a strategic opportunity. “It’s important to understand that the war is not only about Israel’s security. There is a global struggle here over trade routes between the U.S., China, and Russia. The U.S. wants to preserve its economic standing, and its moves in Gaza are about control over global trade. That’s why it is planning to establish a port and create a long regional corridor stretching to the Persian Gulf. As a mayor, I see this as an opportunity: to develop a major industrial and employment zone along the Gaza Envelope border, in the area where the Erez industrial zone once stood, built around a railway station and connected to the regional and global economy.”

In terms of real estate development, Davidi noted that “over the past decade, around 8,500 housing units have been marketed in Sderot – a dramatic leap compared to the previous decade. We are currently populating the Bustanim neighborhood and marketing the Atzmaut neighborhood. The flagship project is the Academia neighborhood, between the railway and Sapir College, the best area in the Gaza Envelope. An engineering campus for Sapir College and a regional R&D center will be established there with an investment of about NIS 150 million, alongside around 3,000 housing units.”

Addressing obstacles in urban renewal, Davidi said: “The State of Israel is making a mistake by routing all land inventory through the Israel Land Authority. It creates bureaucracy and harms development. There are thousands of approved employment plans across the country, but almost no developer takes them on because they’re not economically viable. In the south, the problem is especially severe: urban renewal is not profitable, the processes are too long, and without government incentives it simply won’t happen.”

He added: “Today in Sderot it’s possible to build up to only 10 stories – and that’s not economically viable for developers. That’s why I took a quarter of a billion shekels from the Tekuma Administration and allocated it to subsidizing projects. When we got into the details, such as the cost of underground parking, we realized we would only be able to implement this subsidy in three central complexes, but I believe such a move will significantly raise land values in the city.”

Ashkelon Urban Renewal Authority head Yedidya Grinwald also addressed economic feasibility. “You can’t solve the profitability problem in urban renewal through complementary land – it simply doesn’t work,” he said. “Ten years ago, urban renewal in Ashkelon was almost unrealistic. Today we’re at a different point, but the bulk of housing units are still in the southern neighborhoods, which are also the most challenging.”

“To date, about NIS 100 million has been allocated through calls for proposals,” he added. “We’re talking about subsidies of up to NIS 180,000 per existing housing unit. The next call is expected in the coming months and will range from NIS 100 to 150 million, bringing the total budget to up to NIS 600 million by 2030. Developers prefer direct subsidies over complementary land because it provides certainty.”

Grinwald noted that a large complex on Olei HaGardom Street is expected to move forward this year. “The city is moving toward higher density ratios to enable viable projects, while maintaining a 1:1 parking standard – low relative to Ashkelon, but essential, because an additional underground parking level can financially kill an entire project.”

Davidi also addressed the parking issue, saying: “Even if the district convinces me to build above-ground parking, I won’t do it. Everything will be underground. Sderot will not be a city of parking structures.”

Ampa Capital CEO Dudi Levy presented a complementary approach: shifting from an almost exclusive focus on apartments for sale to significant development of rental housing within urban renewal projects – a sector he says is currently underserved.

“Something interesting is happening in the Israeli real estate market, and I’ll give you a tip: wait half a year,” Levy said. “Today in Israel it takes about 15 years of salary to reach homeownership, yet the peak year for apartment purchases was during the COVID year – one of the hardest we’ve known. Why? Because of interest rates.”

According to Levy, the difficulty of purchasing a home creates an opportunity to expand the institutional rental market within urban renewal. “Even couples with above-average incomes struggle to commit to buying a home. If interest rates drop from 5% to 3.5%, as expected in the coming year, we’re heading toward a new equilibrium. Ultimately, what will really change the market is interest rates.”

Levy proposed a “municipal structure” model, in which municipalities provide regulatory relief and additional building rights for rental-focused urban renewal projects. The developer contributes around 10% equity, with the remainder financed by institutional investors, as is common globally. In his view, a future interest rate decline will make such models particularly attractive.

The issue of density sparked lively discussion. Southern District Planner Michal Meril noted that while very high densities are being promoted in central Israel, densities of 80–90 housing units per dunam are not suitable for the south or for the quality of life residents are accustomed to.

“In the Southern District, there is already a massive volume of plans in the pipeline – nearly 60,000 housing units in planning – and we are constantly developing tools to address economic feasibility,” she said. “Parking is a real game changer: once parking is moved above ground or higher site coverage and additional units per floor are allowed, the equation changes dramatically. We don’t approve plans that aren’t economically viable. Professional appraisers accompany every plan to ensure we’re on a feasible economic path.”

Grinwald added: “We don’t look at multipliers – that doesn’t interest us. We speak more in terms of gross residential area. Within a specific complex there’s sometimes a ceiling you can’t exceed, and that’s why the solutions today are mainly through grants or measures outside the land itself.”