News / Europe

Property Investors Wary of Turkey Before Riots

A protester rests in a hammock hanging from a tree at Gezi Park in Istanbul,  June 4, 2013.
A protester rests in a hammock hanging from a tree at Gezi Park in Istanbul, June 4, 2013.
TEXT SIZE - +
Reuters
— A protest against plans to fell trees for a development near Istanbul's Taksim Square, the precursor to five days of rioting, reflects the scarcity of open space in Turkey's largest city, thanks to rampant construction.
 
Broader anti-government sentiment has fuelled the violent protest after a police crackdown on the peaceful demonstration, which won't help Turkey's appeal to global property investors already wary of its chaotic planning system and unappealing leasing market.
 
Although Turkey received its second investment-grade credit rating last month and construction is booming, international capital from real estate investors has been thin on the ground, though transaction data is limited in what is still a relatively opaque property market.
 
“There have been riots in other countries, but Turkey is different because it comes on top of other issues,” said an investor at a fund with more than 5 billion euros [$6.5 billion] of European property under management.
 
The decision to bulldoze a handful of trees in Gezi Park is part of plans to pedestrianize the adjacent Taksim Square and build yet another shopping center and luxury flats.
 
Parts of Turkey are already “overbuilt”, said Murat Ergin, managing director of Istanbul real estate agent Kuzeybati.
 
Istanbul has 2 million square meters of mall space under construction, dwarfing the 1.3 million total mustered by 60 Western European cities tracked by consultants CBRE. Only Chinese cities Chengdu and Tianjin have more.
 
Lax controls have created a beggar-my-neighbor building spree as bigger new malls muscle out older rivals.
 
The Trump Towers, Sapphire and Carousel malls have all suffered as newer buildings sprouted up nearby, a trend that has contributed to the closure of 24 shopping centers in Turkey over the last two years.
 
“The thinking is if you can build a five-story mall that's worth more than a one-story car showroom, then you will always build the mall,” said a property expert at a global consultancy.

Brave pioneers
 
Foreign institutions looking for a secure rental income stream would also think twice before investing in Turkish office space, since there is not much of a local market base. Office blocks are a common investment for funds in major European cities, but in Turkey they are typically owned by the builder, sold off floor by floor or sold to the tenant.
 
“It's slightly chicken and egg, because with no buyers, local developers can't generate the profits needed to build investment grade assets,” said a second property source familiar with Turkish market.
 
Despite the obstacles, a few brave investors have led the way with mall investments, buoyed by a young population of consumers aspiring to European shopping habits, which has resulted in the number of Turkish malls growing from 46 to about 300 since 2000.
               
Investment yields, or the rental income as a percentage of the property's value, reflect the investment risks of Turkey and appeal to those seeking higher returns.
 
Yields are at a relatively attractive level of about 8 percent for the best retail properties in Istanbul versus 3 percent in London's West End, 4 percent in Paris or about 4.5 percent in the major German cities.
 
Investors that have bought Turkish retail property include the Singapore sovereign wealth fund GIC and U.S. private equity giant Blackstone, which bought three Turkish, malls from Dutch company Redevco last year.
 
Blackstone has also bought about half of the debt of Dutch mall developer Multi Corp in a move that could enable the private equity giant to take control of the company, which has a string of shopping centers across Turkey.
 
Time will tell if fortune favors the brave.
 
“Turkey is not easy to get into, but if Blackstone are there now it's for a good reason,”  the second source said.

You May Like

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid