Retail remains the most dominant investment sector in the Turkish real estate market, but change is afoot, according to panellists at PropertyEU's Investment Briefing on Turkey.
Traditionally, office investment accounts for 40% of most investment markets in Europe. But in Turkey retail and leisure-related assets make up 80-90% of the real estate investment market, according to Jos Tromp, head of CEE research at CBRE.
But although retail remains dominant, office development activity restarted in 2012-13 after being largely dormant for the previous three years since the outbreak of the financial crisis in 2008. Demand for good quality office space in Istanbul is growing particularly among corporates and in the services industry, Tromp said.
Tromp noted that service industries, like corporates, form a major group of office users. The service sector, he said, is likely to grow significantly in Turkey (population 75 million) as it currently has the same levels of employment in the sector as Poland (population 40 million).
'There will be tremendous growth in the financial and service industry over the next 10 to 15 years, Tromp predicted. According to forecasts, the professional and financial service sector in Turkey will grow from 1.4 million jobs to 2.6 million by 2025, he added.
Demand is therefore growing and forecast to increase further in Istanbul for more modern office stock. 'Based on what we are seeing happening on the development side and on the demand side among corporate occupiers, expectations are that within the next 3-10 years the office institutional investment market in Istanbul will change,' Tromp added.
Tromp said the city’s office stock was relatively small in 2008 when the global financial crisis hit and that there was little growth up to 2011. But activity has picked up and it is estimated there was 10% year-on-year growth in 2012-13.
'Growth is coming to the market and it is expected that more and more occupiers will start moving from older space to newer stock,' Tromp said. 'This is what we have been happening in most of Central and Eastern Europe and the process is still going on.'
PropertyEU's Investment Briefing on Turkey was hosted by CBRE in London on 14 February. Click on the link below to read the other articles. Click here for interviews with the panel at the Turkey Investment Briefings