The Map Is Being Redrawn

Istanbul, the economic capital of Turkey, cannot get its fill of office investments. In the most sought after region of Levent-Etiler-Maslak the rents in office plazas go for up to US$40 a meter. When supply is insufficient, new plaza regions develop. Office investments rank first in Europe with a return of 7 percent. For this reason, despite the global economic difficulties, European experts propose “a buy” for office investments in Istanbul.

The European Real Estate Report, which was prepared by PricewaterhouseCoopers (PwC) and the Urban Land Institute, one of the leading institutions in the sector, identified Istanbul as the city which offered the greatest opportunities in 2006 and 2007. In 2008 it was the second “opportunity region” after Moscow.

The research, which covered 27 cities and was conducted with the participation of more than 500 European real estate experts and investors, singled out Istanbul in particular for the opportunities it offered for the office market. This also clearly shows why 85 percent of European real estate agents recommend a “buy” for Istanbul offices. For residential housing the rate fell to 58 percent. Istanbul really was the first target for foreigners in 2007, where office returns stood at 7 percent and rents rose by 45 percent.

The leaders were the plazas in the Maslak, Levent-Zincirlikuyu and Mecidiyeköy neighborhoods on the European side of the city and Altunizade, Kavacık and Kozyatağı on the Asia side. In the last ten years, the number of plazas in Istanbul has risen sixfold and the chances of being able to buy in one of these plazas in which foreign and leading Turkish companies are located place is very low. Indeed, for rentals the occupancy rate on the European side of the city is around 100 percent.

High Demand, Low Supply
The total office space in Istanbul has reached 2.1 million square meters. This is regarded as a low figure when compared with similar cities in the West. The most attractive region in the Istanbul office market is the triangle of Maslak-Levent-Etiler. In addition to A-type plazas, the ease of communications and prestige mean that there is a lot of interest from companies. Multinational companies and expanding Turkish ones are competing to get a place in this region, where a significant proportion of new rental demands cannot be met.

New Investments On The Way
In fact, the problem is the result of it being impossible to find land to build plazas in the triangle in where the heart of the business community beats. The fact that there are not enough offices being built between Şişli and Maslak pushes up prices. At the moment, there are nearly 10 empyt or usable plots of land in this region.

The Dubai Towers, which are planned to include 50,000 square meters of office space and the TAT Towers, which are due to be completed this year, are amongst the best known of the new developments. To these investments can be added the plot of land which the Zorlu Group has purchased and for which there are currently problems with building permits and the locations of the Renault and Roche factors and the Çiftçiler Project, which will be completed in 2009.

Real estate experts are unanimous that, even if the prices are high, these plazas will be quickly rented out. Companies which cannot find a place in Etiler-Maslak-Levent are turning to Şişli as their second preference on the European sides of the city.

Where Will The Trend Shift On The Anatolian Side?
In recent years, there has been intensive activity in the office market on the Asian side. The fact that office rents are more reasonable than on the European side and the possibility of working in buildings with more office space are the reasons that people prefer this shore.

Most of the offices on the Anatolian shore are concentrated in the Altunizade, Kavacık and Kozyatagı neighborhoods. Many multinational companies are already establishing support units for their headquarters and some banking operations on this side. In the future, Ümraniye and Çekmeköy are expected to become the new centers of plazas.

Foreign Investors Are Eyeing Plazas
Özge Ülkü/Cushman Wakefield Investment Services Director

Rents Will Rise
 The priority target tenants for investors in office buildings are internationally renowned companies with high credibility. At the same time, local groups are also prioritizing developing new office projects for these tenants. Contrary to all of these new developments, as happened in 2007, rents are expected to continue to rise because the projects which are being realized are not expected to meet demand, particularly in central business areas.

Prices Are Advantageous On The Asian Side
 The most valuable office locations are in Levent and in Esentepe-Zincirlikuyu-Maslak. The shortage of land in these locations and the rapid rise in prices are the reasons for an increase in demand on the Asian side in particular. The price advantage on the Asian side and the productivity of the land have made Kavacık and Umraniye the rising office locations. In the years ahead, investments are expected to shift to the Asian shore and Maslak.

Elçin Cirik
ecirik@capital.com.tr