real estate market overview of turkey - tcmb

Real Estate Market Overview of Turkey

April 2017

Avi Alkaş MRICS, CRX, CSM, CMD, CLS

Country Chairman, JLL Turkey

Istanbul Overview

Retail Market Overview

Istanbul Office Market

Overview

Logistics Market

Overview

Hotel Market Overview

03

12

21

30

36

Content

Istanbul Overview

4

Istanbul Overview

Location

• Approximately 1.3 billion consumers within 4 hours flying time from Istanbul

• Flights to more than 400 international destinations

• 2 hours flight to 22 capitals

5

Istanbul Overview

GDP Per Capita, European Major Cities

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

Zuri

ch

Ber

lin

Ham

bu

rg

Mad

rid

Bar

celo

na

Par

is

Bu

dap

est

Mil

an

Ro

me

Am

ster

dam

Lis

bo

a

Mosc

ow

Ista

nbu

l

Lon

do

n

EU

R

2005 2010 2015 2020* 2025* 2030*

1.0%

p.a.

0.6%

p.a.

2.3%

p.a.

1.3%

p.a.

0.5%

p.a.

0.9%

p.a.

0.5%

p.a.

2.2%

p.a. 1.9%

p.a. 1.0%

p.a.1.5%

p.a.

1.3%

p.a.

0.6%

p.a.

1.4%

p.a.

Fastest growing city among major European cities1st

Source: Oxford Economics

6

Istanbul Overview

Demographic Features

Source: Oxford Economics

0 5 10 15 20 25 30

Dubai

Milano

Berlin

Rome

Madrid

Hong Kong

London

Bangkok

Seoul

Jakarta

Shenzhen

Paris

Moscow

Manila

Istanbul

Delhi

São Paulo

Beijing

Shanghai

Population (Million)

2015 2030

CityAnnual Change

(2015-2030)

Dubai 2.45%

Delhi 1.77%

Manila 1.29%

Beijing 1.25%

London 1.18%

Bangkok 1.01%

Istanbul 0.96%

Shanghai 0.80%

Jakarta 0.78%

Shenzhen 0.72%

Berlin 0.60%

Hong Kong 0.58%

São Paulo 0.46%

Rome 0.43%

Moscow 0.40%

Milano 0.15%

Paris 0.05%

Seoul -0.09%

Madrid -0.10%

• Most populated city in Europe with an estimated population of 14.7 million.

• Population growth outpaces Shanghai, Sao Paulo, Shenzen and Moscow.

7

Istanbul Overview

Major Infrastructure Projects: Metro Lines

Pre-2004

45.1 km

2004-2017

160.5 km

2017-2019

355.5 km

Post-2019

1,023 km

Source: IMM

8

Istanbul Overview

Major Infrastructure Projects: YSS Bridge & Northern Marmara Motorway

Yavuz Sultan Selim

Bridge carries an

eight-lane highway

and two rail lines,

and it was opened in

Q3 2016. Cost of

project is €2.3

billion

The 115 km

Northern Marmara

Motorway connects

Yavuz Sultan Selim

Bridge and the Third

Airport to the

existing highway

network Cost of

project is €1.2

billion

9

Istanbul Overview

Major Infrastructure Projects: Istanbul–Izmir Highway 427 km-long

highway network

between Gebze

(industrial hub of

İstanbul) and

İzmir- main port

city in the Western

Turkey

Travel time

between İzmir and

Istanbul

decreases from

10 hours to

approximately 4hours The 1st phase,

including

Osmangazi

Bridge was

opened in Q3 2016

and the 2nd phase

in 2017. Cost of

project is €2.8

billion

10

Istanbul Overview

Major Infrastructure Projects: The Third Airport

6 standalone

runways and the

capacity to host

over 150airlines

Build-Operate-

Transfer model by a

Turkish consortium

Tender price of EUR

22 billion

Total construction cost

of the project: over EUR

10 billion

3 construction

phases

One of the busiest

airports in the world

Passenger capacity

of 150 million

annually

11

Istanbul Overview

Major Infrastructure Projects: Istanbul International Financial Centre

Istanbul will

compete mainly

with Dubai and

Moscow

Plan to

designate

Istanbul as the

financial

centre of the

region

4.2 million sq

m of office,

residential, retail,

conference, hotel

and park space

USD 2.6billion budget -

the first phase of

the project will

be opened in

2018

0

50

100

150

200

250

300

350

400

450

500

0

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

14.000.000

16.000.000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 2020* 2021*

Existing Supply (sq m) Pipeline Supply (sq m) Unit

13


Supply and Development

• 12.3 million sq m in 405 centres as of Q1 2018.

• 36% of GLA takes place in Istanbul.

• 1.8 million sq m of leasable space is under

construction.

• GLA is expected to reach 14.1 million sq m in

452 centres by 2020 year-end.

Source: JLL, Q1 2018

*Existing and Pipeline Supply

0

1

2

3

4

5

6

7

8

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

To

tal

GL

A (

mil

lio

n s

qm

)

West Europe CEE & SEE Russia, Turkey & Ukraine

14


European Shopping Centre Completions & Pipeline


Note: Includes schemes >5,000m² GLA only; excludes Retail Warehousing and Factory Outlet Centre.

Existing Shopping Centre Stock and Pipeline

Pipeline

0 2 4 6 8 10 12 14 16 18 20 22 24 26

Luxembourg

Serbia

Bulgaria

Greece

Croatia

Belgium

Slovakia

Hungary

Ireland

Finland

Czech Republic

Portugal

Ukraine

Romania

Sweden

Netherlands

Poland

Turkey

Spain

Germany

Italy

France

United Kingdom

Russia

Total GLA (million sq m)

Existing Stock Pipeline 2018-2019

Overall Summary Europe:• Completions 2017 (4m sqm) down

10.4% yoy

• 1.5 million sqm completed during H1’17

• Total pipeline 2018: 4.9m sq m; 2019:

3.8m sqm

• Western Europe: 31% total pipeline

• Russia, Turkey and Ukraine: 50% total

pipeline (marginal increase)

0 100 200 300 400 500 600

Belgium

Hungary

Turkey

Russia

Germany

France

Czech Republic

Poland

Italy

Portugal

United Kingdom

Spain

Finland

Ireland

Sweden

Netherlands

15


Turkey in European Context - Shopping Centre Density


Average Density: 206 sq m GLA / 1,000 inhabitants

Total GLA in sq m / 1,000 inhabitants

Average Density (GLA / 1,000 inhabitants):

All countries 220 sq m

West-Europe 275 sq m

East-Europe 161 sq m

Note: Includes schemes >5,000m² GLA only; excludes Retail Warehousing and Factory Outlet Centre. Average density figures based on countries shown on the graph.

16


Retail Sales Growth Forecast 2018-2020

Source: Oxford Economics, January 2018

17


Turkey Retail Density Map


• It should be noted that the cities marked in red are the densest markets in Turkey while the cities shown in white currently lack a

modern shopping centre excluding planned projects.

• While in 2005 only 21 cities had a modern shopping centre, currently 63 cities accommodate at least one. Istanbul and Ankara are the

densest markets due to their significant population and purchasing power compared to the rest of the country.


European Prime Rent Comparison


-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

500

1.000

1.500

2.000

2.500

3.000

3.500

Year o

n Y

ear Ch

ange P

rime R

ent (%

)

Pri

me

Sh

op

pin

g C

entr

e R

ent

Q4

20

17

(€

/sq

m/p

a)

"Prime Rent Q4 2017 YoY Change (RHS)

€1,076

€1,292

€1,998

€3,870

€3,566

€700

€100

€10,321 €1,900

€2,163

€131€46

€362

€411

€3,924 €9,971

€430

€516€635

€190

€1,539 €105

€45

€78

€507

€596

€318

€140

€30

€1,913

€1,559

19


European Retail Investment Volumes: 2017


Note: This review considers all investment sales of shopping centres, retail

warehouses, factory outlet centres, supermarkets and high streets in Europe. The

analysis excludes any investment deal less than $ 5 million in value.

Retail Transaction

Volumes 2017 in million €

4,000 or over

2,000 to 4,000

1,000 to 2,000

600 to 1,000

3

4

5

6

7

8

9

10

11

Ger

man

y

Fra

nce

Sw

eden

Un

ited

Kin

gdo

m

No

rway

Irel

and

Spai

n

Bel

giu

m

Den

mar

k

Fin

lan

d

Port

ugal

Cze

ch R

epu

bli

c

Ital

y

Pola

nd

Net

her

lan

ds

Hu

ng

ary

Gre

ece

Turk

ey

Ru

ssia

Pri

me

Sh

op

pin

g C

entr

e Y

ield

s (%

)

Western Europe Southern Europe CEE, Russia and Turkey Prime Yield (Current Level)

20

Prime Shopping Centre Yields

Note: Prime yield = Net Initial Yield = Triple Net Income/Gross Purchase Price.Source: JLL, Q4 2017

Bar refers to range of decompression Q2 2007 – Q2 2009

Q-o-Q Yield Movement

Istanbul Office Market Overview

22


Overview

Source: JLL

0

10.000

20.000

30.000

40.000

50.000

60.000

Pa

ris Î

le-d

e-F

rance

Lon

do

n

Mu

nic

h

Be

rlin

Pa

ris C

ity*

+ L

DF

Mo

sco

w

Ma

dri

d

Ham

bu

rg

Bru

ssels

Mila

n

Rom

e

Cop

en

hag

en

Sto

ckho

lm

Fra

nkfu

rt/M

Vie

nn

a

Joh

ann

esb

urg

Dusse

ldo

rf

Dub

ai

Hels

inki

Stu

ttg

art

Oslo

We

ste

rn C

orr

ido

r

Colo

gn

e

Zu

rich

Lyo

n

Am

ste

rda

m

Ba

rce

lon

a

Ista

nbu

l

Wa

rsa

w

Lis

bon

Th

e H

ag

ue

Luxe

mb

ourg

Riy

ad

h

Dub

lin

Ab

u D

ha

bi

Ma

nch

este

r

Ge

neva

Rott

erd

am

Bu

da

pe

st

Go

then

burg

Pra

gu

e

Tota

l S

tock Q

4 2

017 (

in '000 s

q m

)

23


European Office Markets by Size


*Paris City refers to CBD, 18/19/20, 3/4/10/11,12/13, 14/15, 5/6/7 & Centre West (excl CBD).

15,063

53,103

21,479

18,495

20,234

20,235

14,903

13,205

12,551

12,142

Top 10 office markets by size

(in ‘000 sq m)

24




-

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

7.000.000

8.000.000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019* 2020*

Existing Supply (sq m) Pipeline Supply (sq m)

25




• As of Q1 2018, the existing grade A office supply in Istanbul outpaced 5.3 million sq m GLA.

• There is circa 1.75 million sq m office supply under construction and it is expected that the total grade A office supply will outpace 7

million sq m GLA by the end of 2020.

• The Asian side has the vast majority of the pipeline stock, with 1.36 million sq m GLA, accounting for 78% of the new development.

Sub Market Active Under Construction* Total

Europe CBD Unit 92 2 94

GLA (sq m) 1,972,862 124,400 2,097,262

Non CBD Unit 53 4 57

GLA (sq m) 1,515,935 269,500 1,785,435

Asia Unit 104 15 119

GLA (sq m) 1,828,135 1,359,000 3,187,135

Total Unit 249 21 270

GLA (sq m) 5,316,932 1,752,900 7,069,832

33.347

65.450

112.000 111.495

137.544

241.189

196.752

292.347

129.994146.140

183.295

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

End

20

07

End

20

08

End

20

09

End

20

10

End

20

11

End

20

12

End

20

13

End

20

14

End

20

15

End

20

16

End

20

17

26


Take up Volume (sq m)


• Over the last three years, the Istanbul Office market has witnessed its sharpest decline in demand since the 2008 global financial crisis,

due to:

- The completed relocation processes of many institutional occupiers to new buildings prior to 2015.

- A wait-and-see policy in occupiers’ expansion or relocation plans due to current market conditions.

- The downturn in global companies’ investments to Turkey since 2015.

• As of 2017 year-end, total take-up transactions showed a considerable increase of 25% compared to 2016.

• The GLA volume of the transactions in Istanbul Office Market was recorded as 41,000 sq m during the first quarter of 2018.


Vacancy Rate (%), CBD

• Significant increase in the vacancy rate in the CBD in 2014 due to considerable delivered office supply.

• The vacancy rate reached almost to the level of 23% at the end of 2017. However, the market had witnessed a considerable decrease in

the vacancy rate during the first quarter of 2018, and the rate was recorded as 20.9% as of Q1 2018.

Source: JLL 41

0%

5%

10%

15%

20%

25%

Q1

201

1

Q2

201

1

Q3

201

1

Q4

201

1

Q1

201

2

Q2

201

2

Q3

201

2

Q4

201

2

Q1

201

3

Q2

201

3

Q3

201

3

Q4

201

3

Q1

201

4

Q2

201

4

Q3

201

4

Q4

201

4

Q1

201

5

Q2

201

5

Q3

201

5

Q4

201

5

Q1

201

6

Q2

201

6

Q3

201

6

Q4

201

6

Q1

201

7

Q2

201

7

Q3

201

7

Q4

201

7

Q1

201

8

$25

$30

$35

$40

$45

$50

Q1

201

2

Q2

201

2

Q3

201

2

Q4

201

2

Q1

201

3

Q2

201

3

Q3

201

3

Q4

201

3

Q1

201

4

Q2

201

4

Q3

201

4

Q4

201

4

Q1

201

5

Q2

201

5

Q3

201

5

Q4

201

5

Q1

201

6

Q2

201

6

Q3

201

6

Q4

201

6

Q1

201

7

Q2

201

7

Q3

201

7

Q4

201

7

Q1

201

8


Prime Rent (USD / sq m / month)

• Prime rent levels decreased to USD 40 per sq m/month from USD 45 per sq m/month throughout 2016. And its downturn has continued

during 2017 and dropped to USD 30 per sq m/month as of Q4 2017.

• Downturn in global companies’ investments to Turkey since 2015 and ‘wait-and-see policy’ in occupiers’ expansion or relocation plans

due current market conditions.

Source: JLL

USD 30

42

3.75%

3.75%

4.00%

2.90%

4.00%

5.25%

3.25%

3.05%3.50%

4.50%

3.95%

3.75%

3.30%3.00%

3.50%

6.00%

4.85%

5.00%

10.00%

11.00%3.75%

12.75%

7.50%

4.75%

6.75%

4.20%

8.50%

Weighted

European Avg

3.99%

(-17 bps y-o-y)

3.60%

29



Note: Country colour reflects the average prime yield regarding the city or cities represented.

Prime Yields

7.75%

Logistics Market Overview

31


Main Industrial Markets

Source: JLL

• The primary logistics market is located in Turkey’s Marmara region, including Istanbul and Kocaeli provinces.

- Hadımköy and Esenyurt on the European side

- Tuzla on the Asian side

- Gebze, Çayırova and Dilovası in Kocaeli

32


Market Snapshot


• As of Q1 2018, total logistics supply in the Marmara region, including Istanbul and Kocaeli sub-markets, increased by 612,250 sq m to

9.96 million sq m compared to the Q1 2017.

• Approximately 2.2 million sq m of stock is planned in the Kocaeli and Istanbul sub-markets.

Key Market Figures

Total Stock (sq m) 9,960,880

Pipeline (sq m) 815,198

Planned (sq m) 2,194,663

Vacancy 12.7%

Prime Rent USD 6.25

Average Rent USD 5.25

Expected Yield 8.75%

Q1 2018 Take-Up (sq m) 118,919

*To be completed by end-2020

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

4.500.000

Europe Asia

Istanbul Kocaeli

Existing Stock Under Construction* Planned

33


Vacancy Rate


• We witness that the market started to rebound since the beginning of 2017 recording almost 644,000 sq m of logistics leasing

transactions as of 2017 year-end, a 73% rise from 2016 year-end. However, the transaction volume in Q1 2018 was on the decline by

falling to 119,000 sq m.

• A number of the logistics companies have also utilized vacant areas in their existing warehouses to meet additional needs.

• The overall vacancy rate showed an increase during the first quarter of 2018 and was recorded as 12.7% as of Q1 2018.

Take Up (sq m)

6% 3%4%

87%

Istanbul Europe

Istanbul Asia

Kocaeli

Occupied Area

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

2015 2016 2017 2018

Q1 Q2 Q3 Q4

10.3%

Moscow7.0%

Stockholm

8.0%

Gothenburg

5.0%

Hamburg

6.2%

Poznan

6.8%

Warsaw

10.1%

Wroclaw

2.9%

Prague

6.0%

Birmingham

2.0%

London

2.8%

Madrid3.0%

Barcelona

6.1%

Lyon

6.8%

Paris

3.0%

Munich

4.5%

Frankfurt

4.2%

Rotterdam

0.0%

Brussels

2.0%

Milan

5.0%

Zagreb5.2%

Budapest

2.5%

Bratislava

4.0%

Bucharest

34


Vacancy Rates


Estimated Aggregate

European Rate

5.2%

Vacancy Rates

Increase YoY

Stable YoY

Decrease YoY

Vacancy Rates Change

<5.0%

5.0% – 10.0%

10.0% – 15.0% 11.3%

Istanbul

8,50%

8,60%

8,70%

8,80%

8,90%

9,00%

9,10%

9,20%

9,30%

Q1

201

0

Q3

201

0

Q1

201

1

Q3

201

1

Q1

201

2

Q3

201

2

Q1

201

3

Q3

201

3

Q1

201

4

Q3

201

4

Q1

201

5

Q3

201

5

Q1

201

6

Q3

201

6

Q1

201

7

Q3

201

7

Q1

201

8

$5,6

$5,8

$6,0

$6,2

$6,4

$6,6

$6,8

$7,0

$7,2

Q1

201

0

Q3

201

0

Q1

201

1

Q3

201

1

Q1

201

2

Q3

201

2

Q1

201

3

Q3

201

3

Q1

201

4

Q3

201

4

Q1

201

5

Q3

201

5

Q1

201

6

Q3

201

6

Q1

201

7

Q3

201

7

Q1

201

8

35


Prime Rent (USD / sq. m / month)

Source: JLL

• The prime rent for logistics market, which showed a decrease to USD 6.25 from USD 7.00 per sq m/month in 2017, remaned stable

during Q1 2018.

• It is estimated that prime yield, which has remained stable at the level of 9.25% until Q2 2017, has shown a decrease to the level of

8.75% for the logistics sector in Q3 2017 and it remained stable during Q1 2018.

$6.25

Prime Yield (%)

Source: JLL

8.75%

Istanbul Hotel Market Overview

37


International Visitor Arrivals & Visitors Origin

• The number of international visitors has

increased to 1.83 million, a 59% increase in

YTD February 2018, compared with the same

period in 2017.

• In 2017, the main international source markets

for İstanbul are Germany (9,1%), Iran (8,3%),

Saudi Arabia (5,1%), Russia (4,6%), United

Kingdom (3,5%) and France (3,4%).

• In 2017, visitors from USA (-15,2%), Greece (-

9%), Canada (-6%), and Germany (-2%) has

been decreased compared to same period in

2016, which has been counterbalanced by an

increased demand from Iraq (85%), Russia

(66%), Uzbekistan (43,2%), China (43,1%) and

Quwait (41,6%).

Source: Istanbul Provincial Culture and Tourism Directorate

050

100150200250300350400450

Fo

reig

n V

isit

or

Arr

ival

s (0

00

)

2016 YTD May 2017 YTD May

0

200

400

600

800

1.000

1.200

Fo

reig

n V

isit

or

Arr

ival

s (0

00

)

2016 2017

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

7 Y

TD

Feb

ruar

y

201

8 Y

TD

Feb

ruar

yFo

reig

n V

isit

or

Arr

ival

s (0

00

s)

38


Passenger Arrivals

• In 2017, the number of passenger arrivals to Atatürk International Airport have increased to 63.7 million

by 5% compared to same period in 2016.

• In 2017, the number of passenger arrivals to Sabiha Gökçen International Airport have increased to 31.4

million by 6% compared to same period in 2016.

• The total number of passenger arrivals to Atatürk International Airport and Sabiha Gökçen International

Airport have increased by 23% compared to 2017, with total passengers reaching 15.07 million in YTD

February 2018.


0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

100.000

2010 2011 2012 2013 2014 2015 2016 2017 2017 YTD

February

2018 YTD

February

Pa

ssen

ger

(0

00

)

39


Hotel Supply

• In 2017 YTD December, the graded hotel supply

in Istanbul reached around 545 hotels over

53.000 rooms.

• The market is heavily dominated by the upscale

hotel segment in terms of the room supply. The

5-Star segment hotels comprises the most rooms

accounting for 47% of the total room supply

followed by the 4-Star segment hotels accounting

for 25% of the total room supply.


Grade# of

Establishments

# of

Rooms

% of total

Rooms

5-Star 99 25,572 47.47%

4-Star 120 13,607 25.23%

3-Star 121 7,180 13.31%

Other* 205 7,566 14.03%

Total 545 53,925 100%

Other* : Motels, Inns, Apart Hotels, Pensions, Hostels, Boutique Hotels,

Special Establishments, 1 Star, 2 Star

40


Master Card Global Destination Cities Index

• In 2016, Istanbul maintained its position as one of the worlds’ major destinations according to the

Master Card’s ‘Global Destination Cities Index 2017’.

• Istanbul ranked as the 3rd most visited destination city in Erurope in 2016, with 9.16 foreign visitor

arrivals.

• Istanbul ranked as the 5th in terms of highest international visitor spending in Europe, with $5,8 billion.

• Additionally, the ranking exposes the expected annual growth rates for 1.6 % on spendings and 0.9%

on international arrivals in 2017.

0 2 4 6 8 10 12 14

International Visitor (millions)

Expenditures (billions)

2012 2013 2014 2015 2016

Source: Master Card Global Destination Cities Index Report 2017 – JLL Hotels

• 2018 YTD February while occupancy increased by 38% to 65%, average rates increased by 8% to 70.3

EUR resulting 49% incline on REVPAR to 46 EUR.

• Istanbul General Set includes 151 hotel properties located both on the Asian and European sides of

Istanbul which consists of; luxury, upper upscale, upscale, upper midscale and midscale segment

hotels.

41


Hotel Market Performance - Istanbul General Set, EUR currency

Source: STR - Hotel Market Data & Benchmarking

pq% 2017 – 2018 YTD Change

65% Occupancy p27%

€ 70.3 ADR q8%

€ 46 REVPAR p49%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

20

40

60

80

100

120

140

160

180

2011 2012 2013 2014 2015 2016 2017 2017 YTD

February

2018 YTD

February

Occ

up

an

cy

AD

R (

€)

Istanbul General Set Hotel Performance in EUR currency

ADR (€) RevPar (€) Occupancy

© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such documentation and

information remains the property of JLL and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without

the prior written authorization of JLL. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.

Istanbul

Maslak Link Plaza, Ayazağa Mah. Eski Büyükdere Cad. No: 3/5

34398 Maslak - İstanbul, Türkiye

Tel: +90 (212) 350 0800

Fax: +90 (212) 350 0806

Avi Alkaş, MRICS, CRX, CSM, CMD, CLS

Country Chairman, JLL TURKEY

[email protected]+90 212 350 0710 (Office Ms. Funda)

+90 532 265 3103 (Mobile)

Thank You...

real estate market overview of turkey - tcmb

Documents