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TURKEY – strong results for the office market


1 December 2014

Following political uncertainty and the resulting market volatility, the Turkish real estate market started the year 2014 on a concerned note, according to Colliers International, Turkey.

However, as Colliers observed, the two elections scheduled in the first 8 months of 2014, which have been anticipated to cause a recession, did not have significant effects on the country’s real estate markets and the transaction activity in Istanbul has reached unexpected high levels in the first six months of the year.

“For example, we witnessed a higher activity volume in the office leasing market compared to 2013. However, after the third quarter, the economic recession that has caused a negative effect on the profitability of the corporations, combined with high interest and exchange rates, and the slowdown in demand, has caused a more negative impact on the markets than the political uncertainty.

“As a result, all sub-segments of the real estate market were affected. Especially the oversupply, which has been developing in residential and retail markets in metropolitan cities such as Istanbul and Ankara for many years, has always caused a fast and serious impact in times of economic slowdowns. The current surplus in the new residential stock in Istanbul, which is creating unsold stacks especially in mid and mid-high income categories, seems to lead to a re-evaluation of the concepts of the large scale urban renewal projects,” Colliers said.

Political uncertainty also impacted the investment market in H1 2014, according to Avi Alkaş, Country Chairman, JLL Turkey. “Global investor interest remained limited but continued during H1 2014. The AKP party strengthened its domination with winning the presidential election in on August 10th, and the real estate market reached a more stabilised state. Despite the political uncertainty, local investors continued to be aggressive on development projects and acquisitions,” Alkaş said.


In May last year, Moody’s lifted Turkey’s government bond ratings one step up from BA1 to BAA3, meaning the country’s investment outlook is defined as stable. “The rating is a reflection of ‘recent and expected future improvements in key economics and public finance metrics,’ while Moody’s analysts said that ‘Turkey’s structural and institutional reform progress is expected to reduce the vulnerabilities to shocks to international capital flows over time.’

“However, it is observed that Moody’s investment grade update has not affected the investment market in Turkey. This is mainly due to the investors’ need for economic and political stability with a balanced environment, and the political uncertainty in 2014 caused several investment decisions to be postponed,” commented JLL’s Avi Alkaş.

Colliers however added that they have observed a shift in the investor profile following Turkey’s upgrading, saying that today there are more institutional players active as compared to more risk takers in the past.


According to Colliers, office activity was the most significant sector in Turkey in 2014 so far. The firm said that the total area of Grade A office space leased in Istanbul has already surpassed the total transaction volume of 2013, as of end of third quarter this year.  “The main reason for this is the need for new offices by businesses due to aging building stock and increasing demand for technical infrastructure and security in office buildings,” Colliers said.

JLL’s Avi Alkaş agreed, saying that while the retail investment market continued to remain inactive, development projects and owner-occupier acquisitions in the office market were strong. “At the beginning of 2014, despite the election uncertainty, the largest office project site acquisition concluded with Skymark along Büyükdere Avenue, which was represented by JLL Turkey on the sell side. Another important owner-occupier acquisition was realised as part of the Vadistanbul project, one of the major mixed-use developments located in Seyrantepe,” Alkaş said.

The JLL expert also added that following the August elections, Gulf investors are back on the Turkish market, with a concentration on residential developments.


Looking ahead to 2015, Colliers believe that the remainder of 2014 and the first period of 2015, until the elections, will mainly be marked by economic uncertainty and the slowdown caused by the decline in the growth while most new projects in the real estate market will be re-considered based on the new market conditions.

JLL added that with the general elections in 2015, and the regional political unrest, the need for stability has increased. However, Turkey’s spread over the yield levels in the core markets of Europe is expected to place Turkey back on investment radar.

“Investor demand for prime assets is strong; however there are not many opportunities available in the market. Unless political situation deteriorates we believe any upcoming prime opportunity in the market will face strong demand,” JLL’s Avi Alkaş concluded.

Turkey 2014 highlights

  • Turkey’s Q1 growth rate was recorded at 4.3%, exceeding the 4.0% growth forecast
  • European and U.S. investor activity remained limited, however Gulf investors came back to the market
  • Istanbul remains Turkey’s most developed and active office market; despite new Grade A supply entering the market, occupier demand for prime CBD space is strong
  • Domestic and international retail demand is expected to depreciate in the short term due to political tensions in the Middle East
  • Increasing demand combined with limited availability enhances confidence in the logistics sector