Today, shopping centres are much more than simply retail outlets, but rather serve as lifestyle destinations – a trend well evident in Turkey’s rapidly growing shopping centre market.
By Anna Amin, Editor, Cityscape magazine
For over a decade the Turkish economy has experienced impressive economic growth, something which obviously didn’t go unnoticed in its retail real estate market.
“The Turkish shopping centre industry has shown a phenomenal development over the past decade and is at a quite mature state currently,” says Togrul Gonden, Managing Partner, Cushman & Wakefield, Turkey.
According to the firm, there are 368 shopping centres operational across Turkey, the vast majority of which (322 centres) was opened between 2005 and today.
These very well developed shopping centres became visitor magnets, some of which receive an annual footfall above a staggering 30 million people.
Mixed-use retail trend
As the Turkish economy grew and people’s living standards have changed, this has been reflected in real estate investments in Turkey. A result of this has been the growth of mixed-use projects, and with it, shopping centres in mixed-use projects.
Gonden says that another reason why mixed-use projects are currently so popular in terms of development is zoning and land prices. “A lot of projects need to satisfy zoning and/or leasehold requirements. As developers are predominantly developing in the city centres again there are a lot of leasehold properties partially with historic uses, such as hotels. But also increased land prices have forced developers to create as much synergy as possible to make the feasibility of the project work,” he says.
In addition to this, growing competition in each real estate sector has driven developers to rethink concepts and create lifestyle destinations with diverse offers.
As one such example Gonden cites the future Hill Town project on the Asian side, which, according to him, is well positioned to become a successful mixed-use project with offices, hotel and a shopping centre. “Mall of Istanbul and Kanyon on the European side and Akasya on the Asian side are other good examples of mixed-use projects. The majority of new shopping centres are actually embedded in a mixed-use project and therefore this becomes the norm in the future.”
Beating the competition
In a market as buoyant as Turkey, competition is fierce. While in the past malls could differentiate themselves from others through offering brands not present elsewhere, today’s malls need to be more innovative when it comes to attracting customers and ensuring they will stay ahead of the competition.
While retailer differentiation continues to be a very important aspect, it doesn’t work on its own any more, Gonden says. “Design, tenant mix, F&B mix, thematic features, focussed sectors, and diversity of entertainment offer all are equally important to stay ahead of the competition.”
In terms of F&B, Cushman & Wakefield note that ‘slow dining’ is becoming more essential as opposed to fast food and is also a popular way for malls to differentiate themselves. “Furthermore, F&B is not only located on one single floor any more like in the past but spread between floors where the synergy with other retailers becomes important,” Gonden says.
For Gonden, the most important aspect in differentiation is a focus on lifestyle, which is achieved through offering quality meeting places; something which to an extent is already defined in the design phase and later in the leasing phase. “Tenant mix, architecture, fit out, occupier concepts become essential tools to create such living spaces. Lifestyle is a key word in this context. People don’t want to just simply shop any more – they want to socialise.”
The Middle East has historically been the largest foreign investor group Turkish real estate – a trend which is likely to continue. However, “there are certain investors constantly looking at opportunities. Those who have had experience in investing in Turkey are very likely to still be interested and we are in discussions with them on specific opportunities. These include investors from the U.S. and Western Europe but also from Asia,” says Gonden.
He adds that while Turkey has never been a market with 10 and more shopping centre transactions per year, very significant investment was made in the past. “Turkish real estate companies have also started to buy operational shopping centres rather than only developing which is a new angle.”
2015 has not been an easy year for emerging markets, including Turkey. Currency depreciation, political uncertainty and regional unrest are just some of factors which impacted the real estate market last year. However, amidst all this, the retail sector is holding up well, as Gonden explains.
“Increasing private consumption and retail sales as well as the continued demand for new space, although at a lower level, are positive signs that the growth potential of the retail market is generally positive,” he says.
“Main retail fundamentals have to be weighed against short term negative trends such as the currency volatility. 65% of the population is below the age of 35 and the economy is still growing at levels of close to 4%. Despite a challenging 2015 with two elections and temporary political uncertainty, with depreciation of the Turkish Lira and geopolitical tensions, private consumption still grew at 3.4%,” Gonden concludes.
Turkey’s first designer outlet
With Tuscan valley, Emaar Turkey, a subsidiary of UAE-based Emaar Properties PJSC, is bringing the concept of master-planned communities to Turkey.
Centrally located in Tuscan Valley and developed in partnership with RDM of FINGEN Group and JM Investments, the Designer Outlet will house a selection of luxury brands on a gross rentable area of 45,000 square meters, and will be built on a 203 square meter area of land. Construction of the 125 million dollar project has begun in 2015 and the outlet is scheduled to open this summer.
Emaar Turkey is also continuing the construction of its Emaar Square project, which includes 1,000 luxury homes as well as the Emaar Square Shopping Center, which is one of the largest shopping centers in Turkey, with 44 thousand square meters of office space and 150 thousand square meters of rentable space.