Turkey Real Estate Industry Update Quarter 2 2012

  • February 2014
  • -
  • Business Monitor International
  • -
  • 73 pages

Turkey’s real estate industry is in a highly advantageous position. While the long-term domestic demand
credentials of the BRIC (Brazil, Russia, India and China) economies are often heralded, Turkey may well
be discussed similarly in the years to come. It has a number of factors in its favour, including a dynamic
and youthful population in excess of 75mn, a strong economic outlook and an improving business
environment and private segment mentality. Over the next few years we expect strong growth in the
consumer segment, infrastructure and construction – with all three key factors in buoying the commercial
real estate landscape.

Nothing highlights this more than our most recent data collection, which registers growth across all
commercial real estate sub-sectors in the country’s two main cities of Ankara and Istanbul. The data is
increasingly impressive when viewed alongside the performance of its EU neighbours. Nevertheless,
BMI would highlight the increasing risks to this stellar performance to date, as the risks of a hard-landing
in Turkey are ever increasing.
Demand for office space, especially in Istanbul, is growing and is generally likely to continue doing so. In
the city, especially in premium areas, increasing demand combined with limited supply is lowering
vacancy rates and leading to rent increases.

In the retail sub-sector, high consumer demand for retail products – owing to sustained high consumer
purchasing power at a time of low unemployment – has tended to push up retail rents, especially in prime
areas. Although the industry was flat in 2009 and early 2010, the segment has revived. Retail projects are
being completed throughout the country – not just the main cities of Istanbul, Ankara and Izmir – and are
trading successfully.

Industrial production is in good shape, and the industrial sub-sector is expected to maintain its momentum
throughout 2012. Industrial vacancy rates in Istanbul are among the lowest of any of the countries whose
real estate segments are profiled by BMI. This is largely a reflection of the country’s highly favourable
economic fundamentals. Logistics is the leading industrial sub-sector, driven by increasing industrial
production and growing export-import and retail industries, with increased outsourcing to third-party
logistics firms .

Key Opportunities/Drivers
.. Real estate fundamentals are sound and favourable, based on a high-performing economy,
among other factors.

.. The Turkish real estate investment trust (REIT) segment is increasingly active, affording financial
opportunities in a relatively institutionalised and transparent area.

Key Risks To Outlook

.. Turkey’s real Gross Domestic Product growth is expected to slow in 2012, and the economy remains at risk of
overheating.

.. Turkey is facing increased security and political problems. There is instability in Syria, Israel
and other Middle Eastern nations, and Turkey is in profound disagreement with Israel over
attacks on a flotilla in 2011. Internally, renewed military clashes with the Kurds and large street
protests in Istanbul have further increased political pressure on the government over this longstanding
issue.

.. A hard landing in the country would negatively affect the real estate segment : amid the European
debt crisis, structural flaws in the domestic pension and bank segments, erratic monetary policy,
and rising cost for credit, we highlight mounting real risks to Turkey's construction and real
estate segment outlook.

Table Of Contents

Executive Summary .. 5
Industry SWOT Analysis . 7
Turkey Real Estate/Construction SWOT . 7
Turkey Political Environment and Risk Analysis 8
Turkey Economic Environment and Risk Analysis . 9
Turkey Business Environment SWOT 9
Real Estate Industry Overview 10
Market Analysis - Office 12
Rents and Yields 12
Data : Historic Rents - from 2010 to 2011 (USD per m2/month) . 12
Data : Net Yield, from 2011 to 2012 (%) . 12
Data : Terms of Rental Contract/ Leases - Mid 2011 13
Supply and Demand 13

Market Projection Scenario . 13
Data : Projection Rents - (USD per m2/month) 13
Data : Projection Net Yield, from 2008 to 2016 (%) . 13
Market Analysis - Retail 14
Rents and Yields 14
Data : Historic Rents - from 2010 to 2011 (USD per m2/month) . 14
Data : Net Yield, from 2011 to 2012 (%) . 15
Data : Terms of Rental Contract/ Leases - Mid 2011 15
Supply and Demand 15

Market Projection Scenario . 17
Data : Projection Rents - (USD per m2/month) 17
Data : Projection Net Yield, from 2008 to 2016 (%) . 18
Data : Turkey Retail Sales Indicators, 2008 - 2016 18
Market Analysis - Industrial .. 19
Rents and Yields 19
Data : Historic Rents - from 2010 to 2011 (USD per m2/month) . 19
Data : Net Yield, from 2011 to 2012 (%) . 20
Data : Terms of Rental Contract/ Leases - Mid 2011 20

Market Projection Scenario . 20
Data : Projection Rents - (USD per m2/month) 20
Data : Projection Net Yield, from 2008 to 2016 (%) . 20
Construction Market Outlook 21
Data : Turkey Construction And Infrastructure Market Data . 21
Data : Turkey Construction And Infrastructure Market Data . 22
Construction And Infrastructure Projection Scenario .. 24

Macroeconomic Data . 27
Data : Turkey - Economic Activity .. 29

Environment Overview . 30
Real Estate/Construction Business Environment Ratings 30
Data : Real Estate/Construction Environment Ratings . 30
Turkey’s Business Environment 30
Data : BMI Business And Operation Risk Ratings .. 31
Institutions .. 32
Data : BMI Legal Framework Rating 32
Infrastructure . 34
Data : Labour Force Quality . 36
Market Orientation . 37
Data : Emerging Europe - Annual FDI Inflows 37
Data : Trade And Investment Ratings 39
Data : Top Export Destinations 40
Operational Risk .. 41

Competition Overview 42
Company Monitor . 43
Emlak Konut REIT .. 43
Sinpas Gayrimenkul Yatirim Ortakligi AS .. 44
BMI Methodology . 46
How We Generate Our Market Projections . 46
Construction Market 47
Bank Lending . 48
Real Estate/Construction Business Environment Rating .. 48
Data : Weighting Of Indicators 49
Sources . 51

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