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News Release


Turkey Real Estate Overview Half Year Report

Despite global crisis consumer confidence and retail turnovers are on rise. According to Turkey Real Estate Overview Half Year Report’ prepared by Jones Lang LaSalle; during the first half of the year despite there is a slow down in all components of real estate market including retail, office, logistics and hotel, consumer confidence and retail turnovers have increased.

Despite global crisis consumer confidence and retail turnovers are on rise.
According to  Turkey Real Estate Overview Half Year Report prepared by Jones Lang LaSalle; during the first half of the year  despite there is a slow down in all components of real estate market including retail, office, logistics and hotel, consumer confidence and retail turnovers have increased.
The report prepared by Jones Lang LaSalle Research department has been presented with participation of Chairman of Turkey Avi Alkaş , Managing Director Alan Robertson, Capital Markets& Research Director Dr. Kıvanç Erman, Capital Markets& Research Manager İdil Hamzadi and Jones Lang LaSalle Hotels Turkey Vice President Elif Egeli.
In the report;
• Retailer demand has slowed down leading to temporary rent incentives. Retail turnover is still seeing real growth, partly due to discount campaigns. Consumer confidence is picking up.
•Occupier demand for the office market has slowed down with some occupiers re-locating to less expensive rent sub-markets. Strong development continues in emerging sub-markets such as Ümraniye.
•The logistics market is the most affected by the economic recession, and speculative development is on hold. However, Turkey’s geo-strategic importance significantly enhances the market potential.
International Retailer Interest for Turkey continues
According to Jones Lang LaSalle Turkey Real Estate Overview H1 2009 report;         
The review of Turkish retailers of their investment plans under current market conditions has led to more feasible expansion plans by retailers and a slow down in shopping centre development. Some retailers such as Koton, Desa, Boyner and İpekyol have used this period to grow their business in Eastern Europe, Middle East and Africa.      
Avi Alkaş, Chairman of Turkey denoted that, retailer demand continues for the shopping centres with good location, right concept and cathment. Avi Alkaş quoted that ‘Anchor tenants including department stores, food stores, DIY and electronics chains have remained keen to expand. In particular, electronics chains, due to fierce competition with the entrance of Media Markt and Best Buy, have continued to require new sites.  International retailer interest continued on the back of positive long term prospects of the country. Leroy Merlin and Baumaxx, two well known DIY brands, entered the Turkish market during the first half of the year. Best Buy will open their first store in İzmir. Decathlon, Basler, Aftershock and Bijou Brigitte are other well known international retailers planning to enter the Turkish market in 2009. Prada is expected to open their first stand alone store in Nişantaşı in the Q3 2009 while Miu Miu is opening their store in İstinye Park. Harvey Nichols has announced expansion plans with a new store in Ankara due to open under the new franchise agreement with Demsa.’

Avi Alkaş mentioned that, retailer demand for high street locations has also showed some slow down; but has remained stronger than shopping centres. Nişantaşı has seen no change in rent levels and remains the prime retail street, while Bağdat Street on the Asian side and İstiklal Street on the European side have witnessed some rent decreases. Avi Alkaş stressed that ‘ It should be emphasised that the rent reductions are effective temporarily without a change in contract rents. In our view the prime headline rent remains at €90 per sq m/month; but the effective prime rent ranges between €65-€80 per sq m/month.
Avi Alkaş said that ‘Total GLA of the shopping centre market increased by approximately 160,000 sq m during the first half of this year and reached 5.03 million sq m as of June 2009. This represents a modest 3% GLA growth over end 2008, which hints at a slower GLA growth in 2009 over the previous few years showing the impact of economic conditions on the development market. However, Turkey is a large retail market ranked as 9th highest retail potential in Europe. The GLA growth in İstanbul was particularly weak recording only 51,000 sq m during the first half of the year.  However, the pipeline in İstanbul is strong with 1.62 million sq m due to be completed in 44 schemes, which is higher than the pipeline in the rest of the country.  By end 2010 total GLA in İstanbul is expected to reach 3.5 million sq m compared to 4.7 million sq m GLA in the rest of Turkey.’
•Prime rents decreased by 25% to € 360 per sq m/ annum as of Q2 2009.
The strong occupier demand witnessed in İstanbul over the last two years has notably slowed down in H1 2009. Jones Lang LaSalle Managing Director Alan Robertson stated that the downturn in the global financial markets has affected the İstanbul office market although to a much more limited extent compared to the Western European markets. Alan Robertson quoted that “This has resulted in an increase in vacancy rates, in particular within the CBD, due to its preferential location for financial institutions. However, the limited supply in the CBD has prevented vacancy rates from increasing rapidly, and as of Q2 2009 the vacancy rate is below 5%.  This is compared to 10% vacancy in Prague, 17% in Moscow, 14% in Budapest and 4.5% in Warsaw. Difficult economic conditions are forcing occupiers to review their operational costs resulting in some of these occupiers re-locating to less expensive locations mostly on the Asian side of İstanbul. Ümraniye has emerged as the number one location due to its easy access and growing availability of high quality office space. The decreasing occupier demand has had implications on rent levels causing a 25% decline in prime rents from a high of €480 per sq m per annum in Q4 2008 to € 360 per sq m/ annum as of Q2 2009. With the continuing global economic downturn weakening occupier demand and the increasing supply of office space, a further decrease in rent levels is likely in H2 2009. The development pipeline shows the emergence of new office sub-markets in İstanbul such as Kağıthane and Eyüp on the European side and Ümraniye on the Asian side of the city. During H1 2009 approximately 120,000 sq m office space entered the İstanbul office market.  Major projects included Apa Giz in Levent, Selenium Project in Fulya, Anel Plaza in Ümraniye and Flatofis in Eyüp. Major transactions of H1 2009 were realised out of the CBD area. The largest single leasing transaction during this period involved approximately 9,000 s qm in Anel Plaza. A further 123,000 sq m of Grade A office space is expected to enter the market during H2 2009. Approximately 65% of this pipeline stock is located in Ümraniye.

Recently, two of the major landowners in the Levent sub-market of the CBD, Eczacıbaşı and Tekfen Oz, have started the construction of two Grade A office projects, which shows a degree of ongoing confidence in the market. The most important mixed-use project is Marmara Forum Garden Office in Merter, providing almost 30,000 sq m Grade A office space, is complemented by the 160,000 sq m Marmara Forum shopping center.
The Logistics Market Has Been The Most Affected By The Global Economic Downturn
According to Jones Lang LaSalle’s Turkey Real Estate Overview 2009 Half year report;
The logistics market has been the most affected by the global economic downturn. This has led to some of the major development projects being put on hold. Logistics companies with exposure to export manufacturing industries such as automotive and white goods have been particularly affected. 
Jones Lang LaSalle Capital Markets& Research
Director Kivanc Erman stated that, ‘Ongoing developments are generally owner-occupied projects, Ekol Lojistik recently started construction of a warehouse on a 101,000 sq m land plot in Gebze. On completion, scheduled for 2010, it will be the second largest warehouse park in Europe. Roder Logistics Investment comprising of 47 Ankara-based international logistics companies is planning to establish a logistics hub in Kazan district of Ankara on 389,000 sq m land plot. Tuzla and Gebze (İzmit) on the Asian side and Hadımköy and Çatalca on the European side of İstanbul are becoming increasingly preferred locations. Despite the low investment transaction volumes in the warehouse market, the past few years witnessed increasing numbers of international logistics companies entering the market including DHL, Ceva Logistics, Kühne Nagel, Gefco, Serlog and Arkas-Schenker.  It is therefore likely that Turkey’s logistics market will develop and grow substantially in the medium term to support their increasing activity in the region.’    
Room Rates Decreased by 9.2% Compared to Last Year
According to the Turkish Culture and Tourism Ministry, out of 1.5 million foreign visitors during the first five months, Antalya attracts around 35% of total arrivals, followed by İstanbul at 26%.Visitation in Turkey is dominated by international demand, which in 2008 represented 73% of total arrivals. In view of the current market conditions, however, visitation from these markets decreased by 7% and 20%, respectively, in the first five months of 2009 compared to the same period in 2008.
According to Jones Lang Laselle’s Turkey  Real Estate Overview 2009 half year report;
The decrease in occupancy levels which started in the last months of 2008 continued in 2009. This  has obliged the hotel operators to charge lower room prices. Nevertheless, İstanbul  hotels managed to retain better results than most of the major cities in EMEA in the first four months of the year, except for Berlin and London.
LaSalle Hotels Turkey Vice President Elif Egeli Nişancı stated that when hoteliers face lesser demand, they will first try to keep average room rates stable and allow for occupancy levels to fall, in the hope that the markets will recover quickly.  However, as market conditions continue to worsen, pressure will grow to reduce rates. Following a decline in occupancy since September 2008, İstanbul  hoteliers have implemented this policy. At year to date May 2009, average room rates of hotels in İstanbul  decreased by 9.2% compared to the same period last year.’
According to the report; the majority of development in recent years has been concentrated in İstanbul , although investors have increasingly become interested in secondary and resort locations. During the first half of 2009, some long expected projects came to life.  The Sütlüce Golden Horn Congress Centre was completed in March after more than 10 years, in time for the Fifth Annual World Forum, adding 86,000 sq m of conference and exhibition space.  In June, Hilton Sarıgerme opened, being the first  franchised resort of the brand in Turkey.  İstanbul also welcomed some national and international branded hotels.
Elif Egeli Nişancı said that, ‘For H2 2009, we do not expect to see any of the large scale projects currently planned to be completed. For the remainder of the year, we expect some locally branded hotels to open in İstanbul, in addition to The Edition, a new lifestyle brand by Marriott and Ian Schrager, which is being developed in the old HSBC Building and is scheduled to open at the end of the year. However, we do not believe that the resort markets will be able to reach trading levels of 2008. Events, which are expected to have a positive effect on the trading of İstanbul  hotels include two pharmaceutical conventions in September and IMF & World Bank Congress in October.