BMI View: Political instability and economic turmoil have influenced bearish sentiment for Turkish realestate assets. Demand has fallen for commercial property from both domestic and foreign sources, andrentals have witnessed decline across the board. We expect this to be the predominant theme across thesector in 2017.
Turkey is set to enjoy a more stable business and political environment in 2017, confidence is returning tothe struggling economy and the result of the referendum in April17 is considered a vote for economicstability amongst the Turkish people. While the AKP has stated its desire to support the businessenvironment and provide incentives for foreign businesses, the expanding of presidential powers is viewedas a potential risk to foreign companies who have expressed concerns over the concentration of governmentpowers. There has been a steady drop off in foreign demand for Turkish assets, and commercial real estatewill continue to feel the squeeze in 2017, with rents maintaining downward trend across the board.
Looking at sub-sector trends, the office market will observe weakening demand for both prime andsubprime assets as economic headwinds affect corporate decision-making. The market in Ankara will besubject to rising business uncertainty, as investors react cautiously to the result of the referendum. Istanbulwill be categorised by oversupply, with a trend amongst tenants for relocations and cost-effective options.The retail sub-sector has suffered from a drop in spending and tourist activity, in the wake of the militarycoup in 2016 and a string of terrorist attacks that has influenced wavering consumer sentiment and decliningtourism. There has been a trend of large retail establishments exiting the market as a result. Rental rateshave declined in both Ankara and Istanbul, and we believe this will continue to be the case in 2017, asinvestors remain vigilant to the economic situation.