Foreign investment is pouring into the Turkish real estate market. Major multinationals, such as France’s Carrefour and Germany’s Metro Group, are constructing new shopping malls and hypermarkets, acquiring business offices and warehouses, and opening chain stores to sell their products in Turkey and neighbouring countries.

European and Arab investors are developing skyscraper office blocks or acquiring properties to build large business centres. Individual investors are buying summer homes in coastal areas in western and southern Turkey, and some of the world’s leading hotel operators are building new hotels and holiday villages.

Business has been so brisk that many international developers, real estate assessors and realtors have opened offices in Turkey. Local real estate developers are enlisting overseas architectural firms to design state-of-the-art shopping centres, offices and residential neighbourhoods.

Even the crisis that Turkey underwent in May and June, when the new Turkish lira plummeted 20% in value against the US dollar and the euro, has not deterred foreign investors from entering the Turkish market, experts say. The devaluation has made Turkish properties less costly than before in terms of hard currency, although imported products and services have become more expensive for Turks.

Food for the boom

The boom in foreign investment in the real estate market is being fed by Turkey’s membership negotiations with the EU, which began on October 4, 2005, and the nation’s continued strong economic performance, rising living standards, and changing lifestyles and shopping habits among Turks. Under EU entry conditions, Turkey is carrying out reforms of its legal and financial systems to comply with the laws and regulations of the EU.

“In general, the political and economic situation has stabilised,” says Feyzullah Yetgin, general manager of state-owned Emlak Konut Real Estate Investment Company. “Accession talks with the EU have made it easier for the entry of foreign investment. Membership talks have reduced Turkey’s risk perception in the eyes of foreign investors.”

Ersin Özince, president of the Banks Association of Turkey, told a real estate conference in Istanbul in May: “Foreign investors are interested in Turkish real estate. They want low risks and the highest profits.”

Shopping malls

Examples of foreign investment in shopping malls abound. Germany’s cash and carry Metro Group operates nine stores in Turkey, including three in Istanbul and one each in Izmir, Ankara, Bursa, Adana, Bodrum and Alanya, and is in the process of investing €300m in new facilities and hypermarkets in the country through 2007. It reported total sales of €780m in 2004.

French retailer Carrefour, which has invested more than $1bn in the local market since entering it in 1996, has begun construction of a €100m shopping centre in Istanbul’s Merter district, which will include 200 shops. The project is being promoted as the largest investment for Carrefour outside France. Carrefour operates 471 stores with its Turkish partner Sabanci Holding, including 14 shopping centres, and reported $1.430bn in sales in 2005.

British retailer Tesco acquired a 92.85% stake in Izmir-based supermarket chain Kipa in November 2003. Operating four supermarkets in the Aegean port city of Izmir under Kipa’s name, Tesco acquired plots in the cities of Çanakkale, Antalya, Konya and Aydin last year to build new Kipa stores.

Hypermarkets

Six years after investing in Turkey, Germany’s commercial properties developer and operator ECE now manages seven hypermarkets in Turkey, and is developing another, Espark, in the city Eskisehir, in north-west Anatolia. German do-it-yourself retailer Bauhaus is also active in Turkey, operating three hypermarkets in Istanbul, and planning to open a fourth in Ankara. And Swedish furniture retailer Ikea opened its first hypermarket in May 2005 in Umraniye, a heavily populated Istanbul district, and its second hypermarket in Izmir this year. It plans to open three more big bazaars over the next three years in Turkey.

MDC Turkmall Market, a German-Dutch-owned global real estate development company based in Istanbul, which owns, develops and leases retail and entertainment sites, built shopping malls in Adana, Gaziantep, Kartal (Istanbul), Bilkent (Ankara), Kadköy (Nautilus in Istanbul) and Konya, and four supermarkets in Istanbul. It is now working on shopping malls in Izmir’s Bornova district and in Maltepe and Akatlar (Istanbul), and plans 11 others in Turkey and abroad.

Multi Turkmall and Germany DIFA Deutsche Immobilen Fonds are also developing a 65,000 square metre shopping centre in the Mediterranean port city of Mersin. The Forum Mersin Shopping Mall is scheduled for completion in 2007.

In April this year, Dutch real estate investor Corio acquired a 46.9% stake in Akmerkez, an upscale fashion mall in suburban Istanbul, in a public offering for $189.7m.

Offices and hotels

Arab investors are interested in building high-rise blocks of business offices, while investors from France and the US are interested in tourism projects and mixed-use buildings (hotels, residential and shopping combined).

Dubai Properties International, for example, plans to invest $5bn in real estate in Turkey, including Europe’s two highest office buildings in Istanbul, the spiral Dubai Towers, for $500m in partnership with the Istanbul Municipality. And Tamniyat Group of Dubai and Turkey’s Aslan Group have teamed up to build a $600m industrial city, the 2050 Ucuzlar Project, for small and medium-sized enterprises in Samandra, on the Asian side of Istanbul. The project aims to build ateliers, workshops and small factories for 2200 textile, electronics and leather products manufacturers, and three 63-storey towers that will include a five-star Mariott Hotel and a hospital.

US billionaire investor Warren Buffet reportedly acquired the abandoned construction site of Park Hotel in Istanbul’s Gumussuyu district for $38m in May. News reports said that Mr Buffet planned to turn it into a shopping centre, hotel and residential tower combined, pending approval from municipal authorities.

French hotelier Accor announced this summer that it will invest €300m in 50 hotels with its domestic partner, Akfen. The first two hotels, the 424-bed Novotel and the 456-bed Ibis, are slated to open later this year in Zeytinburnu, a former industrial district of Istanbul.

Housing projects

Both corporate and individual foreign investors are plunging into the housing market, developing large housing projects in Istanbul or buying summer homes on the Aegean and Mediterranean coasts.

“Spain and Portugal were the first choices for European homeowners but they are now saturated. It is Turkey’s turn to attract Western homeowners,” says Erdinc Varlibas, CEO of Varyap Varlibaslar Yapi, a Turkish contractor that is developing housing projects in Istanbul and a hotel in Bodrum.

Haluk Sur, president of GYODER (the Association of Real Estate Investment Companies), says: “It isn’t a fantasy to be able to market one million homes in Turkey to foreign nationals by 2020. Spain sold 1.8 million homes to foreigners since joining the EU. In Turkey, housing prices are one-third less than in Spain. Turkey lacks nothing.

We have everything that Spain has.”

Vektör International Real Estate Investment & Development, a British-Russian-Turkish joint venture, is building 200 residential homes for mid-income families near the new Sabiha Gökçen International Airport in Istanbul’s Asian side. “The mid-market is underserved in Turkey,” says Ekaterina Klopicheva, managing partner at Vektör. “There are many low-quality housing projects going on that are budgeted on a shoestring.”

Dubai’s Emaar Group has teamed up with Turkey’s Atasay, a leading fabricator and exporter of jewellery, to construct 600 luxury villas in Buyukcekmece, 20 kilometres west of Istanbul’s Atatürk International Airport on 1.7 million square metres of land. Called the Lakeside Project, it will cost $700m. If it is successful, Emaar intends to invest up to $10bn in Turkey over the next five years.

Foreign homebuyers

Foreigners have been snapping up homes on the Aegean and Mediterranean coasts of Turkey. In Didim, a resort town of 20,797 inhabitants 175km south of Izmir, about 5000 British citizens have bought homes. The British population now outnumbers the town’s Turkish inhabitants, a Didim municipal official told the real estate summit in Istanbul in May. British citizens, he said, operate restaurants, have businesses, and produce an English language newspaper in Didim; even the town’s leading tax payer is British realtor Claire Walker Tatlici.

British and German citizens have also flocked to the resort towns of Bodrum and Fethiye, Kas and Kalkan, where they have acquired properties.

About 10,000 Germans, Scandinavians and Dutch make the Mediterranean resort town of Alanya their year-round home. Danish real estate investment company Keops operates a development and sales office in Alanya.

In May, Britain’s international property sales agent, Parador Properties of Redhill, Surrey, opened a ‘real estate supermarket’ in the up-and-coming coastal resort town of Gulluk, south of Didim, to market freehold residential properties to purchasers mainly in the UK, Germany and Ireland.