Commercial Investment in Turkey

As far as the number of most high-rise buildings goes, Istanbul is one of the top ten cities in the world. Istanbul will become a high-rise plaza heaven within the next three years. The City gained 90,000 square metres of additional office space during the course of 2007, and 15 new developments are planned for completion by the year 2010.

This increase in commercial real estate in Istanbul is manifesting itself in more shopping malls, regardless of rising interest rates in the country, appears not to be too affected by the financial market shakes. Turkey as a market is characterised by a constantly growing population. Turkey’s projected population growth rate between 2000 and 2050 is 43%, against the European rate of 10.3%. By 2050 it will have the largest population in Europe. It already has one of the youngest populations with an average age of 27 years compared with the EU’s 43 years. Foreign real-estate investors, who have joined with local companies, have developed a big appetite to meet Turkey’s growing economic needs for commercial investment shops, office buildings and apartments with modern amenities.

The Istanbul market exhibits an enormous demand across all types of consumption, giving a generally very positive consumer climate. According to official figures from the retail trade, the relevant purchasing power of Istanbul is approximately EUR1,600 for each inhabitant. However the shadow economy estimated to be at least 40% of the overall economic achievement, considering that actual purchasing power would be clearly higher than this figure.

According to the International Direct Investment FDI inflow, Turkey was 5th amongst the highest FDI attracting emerging markets in 2006 after China, Hong Kong, Singapore and Russia. The FDI inflow from European countries to Turkey made up 74% of the total FDI inflow to Turkey. The direct investment of European investors jumped to $14.7bn in 2006, up from $6.6bn in 2005.

This growth has driven most investors to pay higher prices for projects. The acquisition of Istanbul’s Cevahir Mall – Europe’s largest shopping centre – in 2005 was perhaps the most significant indication of the growing institutional acceptability of real estate investment in Turkey. London-based international property investment, development and asset management companies financed this acquisition with EUR384m, the biggest loan ever put in place for Turkish real estate. The fund was arranged by the syndication of several banks specifically for this acquisition, showing a considerable amount of faith in the country’s investment value.

Corio NV, a Dutch origin property investment company, is working on up to an additional 10 shopping centre projects located throughout Turkey. Combined, these centres are worth $1.5 billion. Corio NV’s 2007 acquisition portfolio totalled EUR139 million throughout various areas of Turkey – proving investors’ confidence in retail demand, boosted by rising purchasing power as well as the lack of supply of organised modern retail facilities in these markets. The future plans of the company involve having a total of 16 projects by 2010.