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TURKISH RETAIL WITNESSES EXPANSION

With favourable market demographics such as a young and growing population, rising disposable income and relatively low retail density compared to Europe, the Turkish retail market is tipped as a promising investment opportunity.

July 2015

As the Turkish economy grows, the Turkish retail sector has been one of the most appealing sectors for both investors and consumers. According to a July 2014 Deloitte report on the Turkish retail sector, per capita disposable income grew with a CAGR of c. 9% over the past 5 years and reached USD 8,895 in 2013; it is expected to exceed USD 13,000 in 2018.

Growth in the retail sector is highly influenced by shopping mall investments and the resulting increase in gross leasable area. In the past five years, the number of shopping malls and total gross leasable area both experienced rapid growth. Increased competition led investors to build larger shopping malls to create differentiation and attract a higher number of consumers, says Deloitte.

MARKET ATTRACTIVENESS

Global brands are flocking to Turkey to reap the benefits that emerge on the back of the country’s favorable market fundamentals.

According to Togrul Gonden, Managing Partner, Cushman & Wakefield, Turkey, “the first and foremost reason to enter the Turkish retail market is the outstanding demographic structure. 60% of the population is below the age of 35, which represents a completely different picture than in Europe for example. At the same time the quality of the shopping centres is very appealing to international retailers and so is the footfall in the three main high streets in Istanbul. Continued economic growth over the last 13 years outpacing European growth by far is another positive factor when considering an entry. Consumer habits and spending does also attract global brands.”

As a consequence, for a large variety of retailers the Turkish market still offers attractive expansion opportunities, Gonden explains, adding that this is probably only “not valid for the electronics sector where a number of international brands were not able to compete with their Turkish counterparts.” Other than electronics, opportunities exist for all other retail segments, according to Gonden.

SUPPLY

According to Colliers International, as of the end of 2014, there were 319 shopping centers (centers with at least 25 stores and a total leasable area in excess of 5,000 sqm) throughout Turkey, with a total leasable area of 9,218,820 sqm, with this figure forecast to reach 12,304,463 sqm by the end of 2016. The cities of Istanbul and Ankara, which between them house 25% of Turkey’s population, take up 55% of the country’s total shopping center leasable area.

Istanbul tops the rankings for total leasable area per head, with a rate of 269 sqm per 1,000 inhabitants. This is followed by the provinces of Ankara and Karabük, with 249 and 171 square meters per 1,000 people respectively. The figure for Turkey as a whole is 120 sqm against a European Union figure of 268 sqm per 1,000 people, Colliers says.

In spite of an increase in organised retail sector investment in recent years, the average figure for Turkey remains significantly lower than the European average, clearly highlighting the development potential in the sector.

CURRENT TRENDS

On the back of Turkey’s attractiveness in terms of retail investment, the country has once again made it to the top of the list of A.T. Kearney’s annual Global Retail Development Index (GRDI). The firm’s recently published 2015 GRDI, a study which ranks the world’s top 30 developing countries for retail investment both in terms of current success as well as future potential, ranks Turkey on 11th place for this year.

Reason for this is Turkey’s young urbanising population which has increasing disposable income. In order to keep up with increasing competition, Turkey saw many first generation shopping malls refurbished in 2014, and 74 new shopping malls are currently being constructed, with Istanbul seeing the biggest influx, A.T. Kearney’s 2015 GRDI says.

Looking at market trends, in supermarkets, key players are experimenting with new formats, such as Migros having introduced 24/7 stores in gas stations, Carrefour rolling out convenience and premium supermarket formats and Turkish discounter Bim having unveiled a new premium supermarket under the File banner.

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