While property developers, bankers, insurance firms and economists all welcomed the passage of Turkey's mortgage law and the impact it will have on the residential real estate market, shopping mall development is experiencing an impressive - though less documented - expansion in Turkey. This has been reflected in the number of new shopping centers that have emerged in Istanbul over recent years, the number of mall development projects that continue apace and the level of foreign investment flowing into the segment of commercial real estate.
Investors have certainly taken note of the business opportunities at hand. US-based Merrill Lynch, along with its Turkish partner Krea Real Estate, owns a 50% share of the Neo Shopping Mall in Eskisehir and is looking to take full ownership of a mall that took $35m to construct. This comes as part of Merrill Lynch's broader plan to buy into real estate in Turkey, with $649.3m reserved to that end.
The biggest acquisition has been that of St. Martins, the UK-based property developer owned by the Kuwait Investment Authority, which offered $421.7m for a 50% share in Sisli's Cevahir Mall in November 2006. After acquiring the initial stake, St. Martins bought the entire complex for a reported total of $750m. This came as a strong reflection of the perceived value of the entity, originally owned by the Istanbul Municipality and Turkey's Cevahir family. As Europe's largest and the world's second largest mall, Cevahir Shopping Centre testifies to the potential of consumption and retail in Turkey.
Local players have followed the trend, pouring capital into mall development projects. Avrupa Construction is managing the building of the 25,000 sq metre Verde Molino Residential and Shopping Centre in Bahcesehir. Larger projects continue to emerge in the city centre of Istanbul. In January 2007 Turkish construction company Garanti Koza hooked up with the founding partner of Istanbul's Akmerkez shopping centre - the Dinckok family - for plans to construct a second Akmerkez on a 80,000 sq metre plot.
Meanwhile, leading shopping centre development company Multi Turkmall - a joint venture between the Netherlands-based Multi Development and Turkey's Turkmall - is developing a range of slick shopping centres across the country, including Trabzon, Aydin, Antalya, Mersin not to mention Istanbul and Ankara.
Such an expansion should come as no surprise. Turkey's per capita Gross National Product (GNP) continues to grow, with Prime Minister Erdogan expecting the figure to increase to $11,000 by 2013, compared to $5341 today. Mall developers rub their hands in anticipation, with more income implying more consumption amongst city dwellers.
Mall development has also been spurred by retailers, anxious as they are to secure themselves a shop in Turkey's top malls. As such, retailers and consumers are there, as are investors, to buy large stakes if not full ownership of local shopping malls.
As Ali Pamir, managing partner of advisory firm DTZ Pamir & Soyuer, pointed out, "retail developers don't have to finish the buildings under construction to find a buyer these days. The difficult task of locating and acquiring a site and acquiring permissions has already been taken care of."
Though shoppers happily embrace new retail hubs, city commuters are non-plussed by the additional congestion that mall development implies, with Kanyon, MetroCity, Cevahir and Akmerkez aggravating chokepoints to Istanbul's congested streets. City planning, one analyst comments, has not factored sufficiently in some of these developments. Such considerations though are unlikely to figure too heavily in the calculations of mall developers and owners, who see Turkey's large consumer potential as a primary determinant of investment.