Turkey's economy and financial markets have continued to develop and stabilise in the last five years. Inflation rates of around 80% during the early 2000s have dropped to single-digit figures in the last two years and political uncertainty has subsided following the double elections in 2007. Despite negative factors such as high interest rates of around 17%, an unemployment rate of around 10% and the large external and current account deficit, the Turkish economy continues to have one of the strongest GDP growth rates in the world (5-6% every year). Indeed, the Turkish economy is now the 17th largest on a global scale and is expected to be in the top 10 by the year 2020.
Turkey's economy and financial markets have continued to develop and stabilise in the last five years. Inflation rates of around 80% during the early 2000s have dropped to single-digit figures in the last two years and political uncertainty has subsided following the double elections in 2007. Despite negative factors such as high interest rates of around 17%, an unemployment rate of around 10% and the large external and current account deficit, the Turkish economy continues to have one of the strongest GDP growth rates in the world (5-6% every year). Indeed, the Turkish economy is now the 17th largest on a global scale and is expected to be in the top 10 by the year 2020.
All these factors justify why the retail sector in Turkey remains a hot target for both foreign and local property investors and why the sector appears to be unaffected by the turbulence on the financial markets or the current high interest rates. Foreign investors such as Corio, Redevco, Quinn Group, St. Martins and HFS have invested aggressively in retail centres and shopping malls in 2006 and 2007, ploughing an aggregate amount of some $ 1 bn into the market. These investments were made not only in major cities like Istanbul, Ankara and Izmir, but also in smaller cities in Anatolia. Some of these smaller cities did not previously have any retail centres at all, giving rise to huge customer demand.
Today there are 143 shopping centres in Turkey and 90 new ones are either being built or are at the project/design phase. The expectation is that the number of malls will reach 400 in the next seven to eight years.
As Turkish families become wealthier, many are turning to shopping centres as places to socialise and for entertainment purposes. Local investors are also tapping into the country's retail potential. Two major privatisations have taken place so far this year, one of which involved a local group and the other a foreign investor. Zorlu Group, a local conglomerate, paid $ 800 mln for a 96,500 m2 plot of land in a central business development area in Istanbul, while Dubai-based Sama Dubai paid $ 700 mln for a similar site close by. Such high land prices are expected to push up retail and residential prices as well as commercial rents in the near future.
This is an extract from Musfik Cantekinler's column which appears in the November edition of PropertyEU Magazine. Cantekinler is partner transaction advisory services at Ernst & Young in Istanbul.
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