Turkish retail sector remains strong, says Jones Lang La Salle

Turkey's retail sector continues to be the country's strongest property investment sector, with about EUR 370 mln in transactions completed thus far in 2007, according to Jones Lang LaSalle's latest Turkish Shopping Centre Market Update, released at the Mapic retail fair in Cannes this week.

While the volume of transactions is down from the EUR 770 mln seen for all of 2006, the number of transactions so far this year has risen to 11 from three last year. At the same time, the 2006 figure was skewed by one major transaction - the acquisition of Istanbul Cevahir Shopping Centre, which accounted for almost 80% of total 2006 investment volume. This year, the most active investor on the market has been Dutch listed property company Corio.

'A key feature of the investment market in 2007 is forward funding and forward purchases, accounting for over 70% of the transaction,' Jeremy Eddy, director of Jones Lang LaSalle's European retail capital markets division, said in a statement. 'With the current pipeline expecting to almost double existing stock in the medium term, and a larger majority of this stock being developed to higher international standards, investors are finding that the best investment opportunities are often through turn-key or forward-funding agreements with local developers.'

Despite compression of prime yields across Turkey, which fell from about 10%-11% in 2005 to 7% as of the third quarter in 2007, Jones Lang LaSalle noted that they nonetheless remain at the top end of the range for prime shopping yields in emerging markets. These yields range from 6.5% in Bulgaria to 6% in Romania and 5.75% in Slovakia.

Turkey is one of the top three European markets in terms of new development and has the third-largest pipeline stock in Europe, with around 2 million m² due for completion in the second half of 2007 and 2008, behind only Russia (4.4 million m2) and Spain (2.6 million m2). Nonetheless, Jones Lang LaSalle noted that Turkey remains well below the European average for shopping centre stock per capita, with strong demand from domestic as well as an increasing number of international tenants expected to continue to drive rental growth in prime schemes.