Istanbul Office Market Hits Record High
Istanbul's office market hit a record high for office market transactions in 2013, dominated by large owner-occupier deals.
Almost 250,000 square meters of office deals were registered last year, as new development projects offered pre-lease and pre-sale alternatives to occupiers and investors, according to Cushman & Wakefield's Annual Review & Outlook Turkey 2013/2014.
"2013 was a record year for the overall volume of office deals completed," Tuğra Gönden, member of the Board at Cushman & Wakefield in Turkey, said in the report. "Interestingly, nearly half of all office transactions in Istanbul last year were for owner-occupiers. Some larger corporations, on the other hand, preferred to meet their need for space by renting prime Class B office stock, which brought about nearly 50,000 square meters of new rental deals."
The report highlights Turkey's economy, with growth in the second and third quarter of 2013 stronger than expected. Unemployment in the country grew from 9.5 percent to 9.9 percent, as the share of total employment fell for the constructions and agricultural sectors. On the other hand, the industrial and services sectors gained share in 2013.
The Ümraniye and Kağıthane districts were highlighted as continued alternatives for the Turkish office market. According to the report, 15 percent of all deals in the last two years occurred in the Ümraniye district. Similarly, the Kağıthane district stood out as one of the most emerging submarkets on the European side of Istanbul.
Vacancy rates fell from 65 percent to 40 percent in Kağıthane on the European side, and fell from 11 percent to 1 percent in Ümraniye. Vacancy rates decreased from 18 percent to 6 percent in Kavacık on the Asian side. The prime unit price in office rentals in the central business district covering Maslak, Levent and Zincirlikuyu was $44 per square meter per month and remained at $24 per square meter per month on the Asian side, C&W states.
In 2013, almost 42 percent of total rental and purchase deals were in the banking industry, with strong demand also rising for the insurance, technology and consumer services industries.
Large-scale transactions made up half of the office deals in 2013, with office spaces larger than 10,000 square meters enjoying the strongest demand. Offices ranging between 2,000 square meters and 5,000 square meters in size accounted for 30 percent of all deals.
The report from C&W also noted the increase in shopping center space, as the total volume of investment for shopping centers reached almost $310 million.
The latest review forecasts the number of shopping centers will reach 440 in five years, as investments are finalized. Total shopping center supply is expected to exceed 12 million square meters by that time.
"The total area of shopping centers reached 9.4 million square meters in 2013, with an annual increase of 10 percent," Toğrul Gönden, managing partner of Cushman & Wakefield in Turkey, said in the report. "In line with the increase in supply, it is expected that shopping center space per 1,000 in Turkey will reach 160 square meters in 2018."