2021 Year-End Turkey Commercial Real Estate Market Overview

JLL Turkey’s H2 2021 research report, including macroeconomic & commercial real estate market figures is published.

21 Şubat 2022
  • Rabia Kurban
Macroeconomic Indicators

Following a wide range of restrictions to prevent the spread of Covid-19 in the first half of 2021 – including both full and partial closures – Turkey entered its normalization process in July 2021. Lockdowns and intercity travel restrictions were lifted, albeit with hygiene, masking and social distancing rules continuing to be observed. All workplaces whose activities had been interrupted were reopened and the working hours of public institutions and organizations returned to normal.

With annual GDP growth in 2020 recorded as 1.8%, Turkey become one of the few economies recording growth against the backdrop of the Covid-19 pandemic.

This positive climate continued into 2021; the Turkish economy exceeded expectations to grow by 7.4% in Q1 2021, 22.0% in Q2 2021 and 7.4% in Q3 2021 on an annual basis. While base effects lifted recorded growth rates in annual terms, the expansion in the Turkish economy was mainly driven by household spending.

The manufacturing Purchasing Managers’ Indices The manufacturing Purchasing Managers’ Indices (PMI), which represent the indicators of economic growth upon a composite single-figure indicator of manufacturing performance, ticked up slightly to 52.1 in December, from 52.0 in November. The health of the sector has strengthened in each of the past seven months. Continued job creation was one of the factors behind the recorded improvement in business conditions in December.

Meanwhile, FX volatility caused the consumer price index to spike to 36.1% yoy in December, the highest level since 2002, and the producer price index, which feeds into consumer prices, rose to 79.89% yoy.

After a stagnant period in 2020, FDI inflows to Turkey gained momentum and recorded a robust recovery by exceeding the last five years’ levels as of 2021 year-end, a rise of 80.7% compared to the same period in 2020.

Retail Market Overview

The existing shopping centre supply reached the level of 14 million sq m in 453 centres in Turkey as of 2021 year-end. Thanks to the rebound in retailer leasing activities, shopping centre openings accelerated rapidly, especially in October 2021. Currently, approximately 883k sq m GLA in 28 centres is under construction, adding up to c. 14.9 million sq m supply by the end of 2024.

Istanbul hosts the majority of the supply with a share of 37% and was followed by Ankara and Izmir with shares of 12% and 6% respectively.

In line with recent completions, the retail density in Turkey, which was recorded at 163 sq m per 1,000 inhabitants in the same quarter of the previous year, increased to 167 sq m as of 2021 year-end and is expected to reach 171 sq m through the completion of under-construction projects in 2024.

The recovery in footfall and turnover figures of shopping centres was robust, especially in July and December, and benefited from holiday seasons such as Bairam and New Year, as well as from customers’ revenge shopping.

Meanwhile, TRY based prime rent was recorded at 900 TRY per sq m/month and increased by 20% qoq and 38.5% yoy, respectively.

Office Market Overview

While the existing Grade-A office supply in Istanbul reached 5.8 million sq m GLA as of year-end 2021, there is circa 1.6 million sq m office supply under construction and it is expected that the total Grade-A office supply will outpace 7.4 million sq m GLA by the end of 2023. The majority of the future supply consists of the Istanbul International Finance Centre project located in Ataşehir, which is planned to be completed by the end of 2022.

The vacancy in the CBD was recorded at 18.0% in H2 2021. Although overall vacancy has increased from 17.4% in 2020, vacancy in premium Grade-A office buildings decreased due to high demand for qualified office space.

87,351 sq m office take-up was realized in 2021. Atasehir on the Asian side and Levent in the CBD have become prominent in leasing activities. Computing and technology, pharmaceuticals and serviced offices were the most active companies in terms of leasing transactions in 2021.

While prime office rent was recorded at 20 USD per sq m and decreased by 20% yoy due to fluctuations in the Turkish Lira, it increased by 29.7% yoy on Turkish Lira basis and was recorded at 240 TL per sq m as of 2021 year-end. 

Logistics Market Overview

As of year-end 2021, the total existing logistics supply in the Marmara region, including the Istanbul and Kocaeli sub-markets, was recorded as 10.55 million sq m. There is also 6.8 million sq m existing non-owner-occupied logistics supply, which was constructed for lease and/or sale purposes as of 2021 year-end.

According to the available data, 17,370 sq m of logistics leasing transaction was realized in Q3 2021 and 10,917 sq m in Q4 2021, reaching a total of 232,553 sq m as of year-end 2021. Leasing transactions were dominated by e-commerce and retail companies, with shares of 34% and 31% respectively, followed by 3rd Party Logistics (3PL), with a 29% share in 2021.

Prime rent of logistics buildings was recorded at 4.25 USD per sq m as of year-end 2021. Meanwhile, logistics prime rent increased to 50 TRY per sq m, recording a 42.9% yoy rise. The ongoing high demand for premium buildings and lack of new supply within the market gives signals of upward pressure on rental levels for the upcoming period.

The logistics market has been one of the markets most positively affected by the Covid-19 pandemic. Alongside a confident climate within the retail market, emerging e-commerce continued to be the major driver of the logistics market in H2 2021.

Hotel Market Overview

During H2 2021, the hotel market benefited from the ease in restrictions and the reopening of international flights, as well as from postponed holidays, as expected. The rebound in the hotel sector was especially vibrant in the summer season, primarily for the riviera region of Turkey.

As of 2021 year-end, 24.7 million foreigners visited Turkey. The highest number of foreign visitors was recorded during August, with almost 4 million visitors. While the number of foreign visitors increased by 94.1% compared to the previous year, it is still 45.2% below the pre-pandemic period. Thanks to the revival in tourism and the recorded rebound in the summer season, tourism revenues in Turkey doubled in 2021 compared to the previous year. However, tourism revenues were 29.7% below those of the pre-pandemic period. 77% of tourism revenues were generated from foreign visitors and 23% from citizen visitors residing abroad. Average expenditure per capita was recorded at 834 USD as of 2021 year-end, with a 9.5% rise yoy, compared to 762 USD in 2020 and 666 USD in 2019 respectively.

Occupancy rates in Turkey increased by 45.1% compared to 2020 and were recorded as 52.1% at 2021 year-end. ADR figures have fully recovered to pre-pandemic levels, especially for the coastal regions of Turkey such as Antalya, Muğla and Bodrum. In Antalya, ADR was realized at 122.5 EUR, well above the European average of 104 EUR.

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