Description:
“Variety of products will continue being the most important problem of Istanbul’s office market”
Both Istanbul and Turkey met the first shopping center in world standards (Atakoy Galleria) and the office building in class A (YKB Plaza) in the same years (1988-89). After 20 years from then, in Istanbul, shopping centers have reached 2,4 million m² and offices 2 million m² of rentable area. During the same period, the number of houses in Istanbul have increased from 1,8 to 3,6 million, and the population from 7,3 million to 12.
Despite having a past of only 20 years and the significant increase in population, the shopping center density of Istanbul has come close to the EU average of 210 m² with 180 m² per 1000 people. Yet the office buildings in class A are faced with a different situation: London 21 million m², Paris 16 million m², Berlin 17 million m², Munich 18 million m² and Athens with 7 million m². So how does Istanbul differ from these metropolises having one of the highest population ratio compared to them?
First of all, just like in any other type of real estate, the basic variables of the office market need to be examined. Namely, how are the conditions both in the “area” or “place” market and in the “asset” or “investment” market?
Firstly, we will have look at the area market:
Service industry: Being the greatest user of office buildings, the serice industry have a share of 51% in London and 41% in Berlin, but only of 14.3% in Istanbul.
Office areas out of standards: As a result of especially high land values at the centres, no new office areas other than class A are built, with the consequence that the stock of class B office buildings never increases. As one might expect, in the service industry consisting of little companies for the most part, even companies with a staff of 25-30 people are settled in “apartment buildings”.
Transportation: As our progress in public transportation solutions is slow compared with the metropolises of the world, the essential requirement of the class A office buildings, “the principle of vehicle transporting of employees to workplaces” is not yet enabled. Instead, we will have to face the truth of “employees transporting vehicles to the workplaces” for a while. At the other hand, there are important differences in the asset market as investment tools:
Housing Alternatives: The investment tool of the real estate investment market, which constitutes mostly of individuals, is housing by nature, as there is a variety of products and it can be used by the investor when necessary.
Institutive Investors: The market players’ majority has to be the institutive investors, since the investment values of the offices are much more higher. Being the most important investment tool of the developed real estate markets, global institutive investors in Turkey do not prefer offices due to management and decision problems arising from the law of property ownership.
Developers: For developers, building office areas are problematic in the same way. Since the institutive developer does not want to invest in offices without a long-term guarantee of tenants and revenue, the developers turn towards housing projects which they are able to finance through Build and Sell. Consequently, numerous and competitive developers keep producing and improving their skills, while exactly the opposite is happening in the office market.
According to my opinion, variety of products will continue being the most important problem of Istanbul’s office market. The increase in the number of class B offices will be the most important factor capable of contribute to the decrease of non-standard office use in the apartment buildings and therefore to the deepening of the office market. Otherwise, the most valuable buildings located in the metropolitan area will unfortunately have to continue to be used inefficiently.
In the last 20 years, there was some good progress in the building of class A office buildings in parallel with the examples from the world. The priorities of the first generation buildings are parking garage, security, central cooling and heating systems and air conditioning, while the building heights, natural lighting and efficient use of elevators were the important aspects in buildings of second generation.
While it is still ambigious how the solutions in the asset market will look in the following period, the inclinations of office users who manipulate the demand in the area market started to become clear. Like the world’s metropolises, Istanbul also will meet soon with zero-energy office buildings with design and therefore an architectural project and the architect’s identity as a statement, providing optimal instead of maximum comfort for its users and making away with the sick building syndrome.
Istanbul’s greatest opportunity at that point is the Istanbul International Financial Center at the west of Atasehir, apart from developing office markets like Kagithane, Umraniye and Kartal. This area, on which the headquarters of Ziraat Bankasi, Capital Markets Board of Turkey and Halk Bankasi are going to be developed for now, is going to be one of the second important centers with its estimated office area of 600.000 m². If these projects will be designed and built as effective spaces able to integrate with their users or not, is the question which all office market players are wonderingly waiting the reply for.
