The geographical location of Istanbul means that the city is divided into European and Asian sides by the Bosphorus waterway. There are structural differences between the two
entities.
The central business district is located on the European side and the Levent submarket is considered to be the prime office location. Here the prime rents are at $18(e8.5-11)/m2/month and the vacancy rate is a reasonable 5%.
The majority of new developments are taking place on the Asian side and as a result vacancy is high, at 20-35%. Because of oversupply and landlord competition the rental levels achievable here are lower at $10-13/m2/month.

Expanding retail market
In the past 10 years the retail sector has expanded considerably in the main cities of Turkey. Istanbul has seen the emergence of many shopping centres including Akmerkez, Capitol, Carrefour, Carrousel, Profilo, Galleria and Metrocity. However, the retail market has also suffered in the past two years, when prime retail rents decreased from $65/m2/month to $40/m2/month. Despite this, the development of new shopping centres is continuing at the same rate as before. The recent opening of the Tepe Nautilus Retail Mall (75,000m2) and the FlyInn Shopping Centre (16,000m2) are good examples of the trend. In spite of the increase in the number of malls, vacancy rates are falling, and the number of foreign retailers entering the market is increasing.

Industrial market
In the past 30 years manufacturing industry in Turkey has contributed significantly to the development of the economy. Throughout the country there are several large manufacturing and warehousing plants which have been developed principally for owner-occupation. The investment market for industrial property is somewhat limited. In the 1980s and 1990s the government developed numerous industrial free zones around the country. In Istanbul itself there is significant industrial activity, with the main industrial areas being Ikitelli and Hadimkoy on the European side of the city and Gebze and Kartal on the Asian side.
Prices of industrial land vary between $50/m2 and $500/m2, depending on location and size. Rental values vary between $2/m2/month and $4/m2/month. Recent transactions reveal manufacturing facilities being located in Tekirdag to the west of Istanbul. Logistics and warehousing facilities are relocating to Hadimkoy on the European side and Gebze on the Asian side.

Residential market growth
Several housing schemes continue to be developed in and around Istanbul, with the local authority having completed some 13,600 new housing units within the last four years in satellite towns for around 45,000 people. The private sector has also completed about 1,500 up-market villas on the European side of the city. New projects are planned by the Municipality of Istanbul in the area of Ikitelli and the private sector has been very active in Gokturk, Kemer Country and Ulus on the European side, and Kozyatagi, Kadikoy, Umraniye and Bostanci on the Asian side.
It is reported that the number of residential sales in Istanbul last year rose to record levels at prices between $500/m2 to $4,000/m2, reflecting quality of location and size.

Yields
The city of Istanbul has traditionally provided many opportunities for the foreign investor prepared to take a long-term view. Investment yields in the retail sector are approaching 10%; yields in the office sector are in the 10-11% range; and in the industrial sector it is still possible to negotiate yields up to14%.
Occupational leases are generally short, being negotiated for periods of up to five years and usually quoted in US dollars or euros.
Many property funds are active in the market. Most of the REITS that are listed on the Istanbul Stock Exchange performed strongly at first but declined gradually with the general stock market collapse worldwide. Throughout 2004, however, REIT values recovered strongly.
Market report by CB Richard Ellis

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