10 December 2013

The Commercial Real Estate segment is continuing to grow in Turkey

Exclusive interview with Mr. Fatih Tosun, Deputy General Manager of TSKB Real Estate Appraisal Company.
Mr. Fatih Tosun, Deputy General Manager of TSKB Real Estate Appraisal Company.     

REImonitor: The Commercial Real Estate segments (Hotel, Office, SC/Retail …) in Turkey are all in different stages. Could you briefly describe the current situation in Turkey and give an outlook.

Mr. Tosun: ‘The Commercial Real Estate segment is continuing to grow in Turkey. In the Hotel Market , hotel investments are not only in progress in Istanbul, but also in the other cities. During the January-September 2013, the number of visitors coming to our country has increased by 6.60% as compared to the same period last year. Especially the number of those visiting Istanbul has increased considerably above the average in Turkey. We might note that the Gezi park protests have prevented this ratio from increasing even further, but also that it will not have any negative impacts on the coming period. When we look at the hotel room prices and occupancy ratios, especially in Istanbul, we observe that there is constant increase as compared to 2012, with the exception of June. We are also observing that new supplies are arriving in line with these statistics.
Specifically, the projects of brands such as Radisson, Wyndham, Shangri-La, Marriott, Hilton and Raffles have been striking in 2013.

The office stock in our 3 major cities, which pose as the locomotive of the Office Market , continues to increase, especially in Istanbul aiming to take firm steps to evolve into a finance center. By the end of 2015, the A type office stock is expected to reach 4.5 million sqm. These circumstances are causing the vacancy ratios to increase, as the office buildings are completed. The supply has started to be concentrated on the Asian side recently. In parallel with this, leasing transactions have also become more intense on the Asian side. No one can deny that the activation of the new transportation projects and the Atasehir Finance Center have made a significant impact.

On the other hand, the increase in the leasable area in the Retail Market continues to increase, although it is not as high as that during the 2007-2011 periods. As we approach the end of 2013, the supply has reached 9 million sqm and almost 40% of this supply is in the Istanbul Retail Market. The leasable area per 1,000 persons throughout Turkey has reached 120 sqm. This is an increase by nearly 2-fold over the past 5 years. Apart from Istanbul, it is observed that there is a strong incoming retail supply to the Ankara, Izmir, Bursa, Antalya, Mugla, Konya and Kocaeli provinces.’

REImonitor: How about the Residential market?

Mr. Tosun: ‘Turkey continues to grow rapidly in the residential market. While a total of 607,098 residential units have been sold in 2010; 708,275 have been sold in 2011 and 701,621 in 2012; now it is expected that an all-times record will be broken in 2013 and over 1 million residential units will be sold. The residential unit prices have displayed a continued increasing trend since 2009. Starting with the 2nd quarter of 2011, the annual increase during the 2012-2013 years has always been above the annual inflation rate. One of the major causes for this has been the decline of the housing loan ratios from 1.20% down to 0.70%. In line with all of these, the housing loan volume, which was 73 billion TL in July 2012, has now reached 107 billion TL. The ratio of the mortgaged housing sales to the total housing sales has continued in the range of 40-45% over the last 3 years. And this demonstrates that the reflection of the country’s economic status on the interest rate is the most determinant factor now. Therefore, low growth not only poses as an economic risk, it also stands as a risk in housing sales for us.

In the coming term, it appears that both the private sector and the public sector will concentrate on public transformation in real property investments. With the VAT ratio changes made in residential units at the beginning of 2013, the urban transformation projects were already expected to be attractive. The housing stock especially in the growth axes of Istanbul has already triggered real property investors to focus on urban transformation projects at urban centers.’

REImonitor: It is often heard that Turkey is a risky and a non-transparent market. As an appraisal company your daily work is to evaluate the market/regions, assets, land plots, investments etc. Is Turkey a nontransparent and risky market? What should/could be changed?

Mr. Tosun: ‘The inadequacy in the market indicators emerge as an obstacle for global investments. Although the transactions recently made in the market have been provided to us as an indicator, the Turkish Market still needs further transparency. The statistics in the housing market provided by TUIK, Central Bank and the REIDIN company, plus the statistics published in the Commercial segment by the related public institutions and associations are more reliable now. As a Real Property Appraisal company, we are still constrained by a market where Non-institutional companies, Individual purchases-sales are abundant. However, the ability to build their own databases and the availability of technical equipment for analyses will especially help the real Property Appraisal companies in overcoming these problems. We believe that a serious approach to this issue by both the state institutions and the private entrepreneurs will shift the market further towards transparency.’

REImonitor: Many international investors, operators, developers etc. have Turkey on their radar. What can be expected in 2014?

Mr. Tosun: ‘We believe that the preference of Turkey by many international investors in all segments of real property in 2014 will be continued. We believe that the hotel, office and logistics segments will emerge with respect to investments, and the retail and the housing sectors will emerge with respect to purchasing.’

REImonitor: Green and sustainable developments in Turkey are …

Mr. Tosun: ‘There is awareness in Turkey which has started over the past 5 years. Although the ‘Regulation of Energy Performance in Buildings’ issued in December 2008 is a progress with respect to legislation, any steps have not yet been taken in practice. On the other hand, a green building certification system is still not available in Turkey; however, the guideline study prepared for ‘Green Home Certification’ by the Environment Friendly Green Buildings Association is about to be completed.

Meanwhile, this awareness influences the market in the world, thanks to the ‘Green Building Certification Systems’ initiating the awareness. For example, the 2011 Fannie Mae Selling Guide states: ‘In order to reflect the total contribution of the energy active characteristics of the subject real property to the market value, the valuation experts definitely should compare the energy active properties of the subject real property with comparable real properties, in the sales comparison analysis grid (in the Fannie Mae valuation from).’ The availability of the (Fannie Mae Selling Guide, 2011)’ article poses as an indicator that the impact on market value can be measured at a place where sustainability awareness has developed.

As it has started to be demanded over the past 2 years, we will observe a rapid increase in buildings holding ‘Green Building Certification’ in the coming period of 5 years, upon observing the demand by contractors, developers and investors due to the environmental, social and economic factors of the market in Turkey. This circumstance will lead to changes in both the market values of the buildings and different products and services will emerge in financial services, such as mortgages, etc. This will also pose as a major factor in the activation of the economy, and especially in adding new products, especially to the construction sector and the sub-sectors. Among Green Building examples in Turkey, there are LEED, BREEAM and DGNB certified buildings.’

Source: www.REIMonitor.com