Set the scene Market presentation London, 8 th November 2012 Presentation at Property EU Turkey Real Estate Investment Briefing
IZMIR ISTANBUL ANKARA KAYSERI NEVSEHIR TRABZON MARKET EXPLORATION: 2003 MARKET ENTRY: END 2004 FIRST INVESTMENT DEAL: 2005 FIRST PROJECT OPENED: 2006 FTF FORUM TURKEY FUND: 2009 AYDIN DENIZLI MERSIN MULTI IN TURKEY TODAY: 10 COMPLETED PROJECTS 1 UNDER CONSTRUCTION 8 IN DEVELOPMENT MULTI DEVELOPMENT MULTI MALL MANAGEMENT FORUM TURKEY FUND IZMIR ISTANBUL CANAKKALE ANTALYA ADANA AYDIN CORUM GAZIANTEP ELAZIG DIYARBAKIR
What makes Turkey? Volume Large country, large GDP Large population, big urban network Growth Economic growth Population growth Household formation & urbanisation Unique market in European market context Sleeping Giant became Economic Tiger after 2002
Geography Size: 778,000 km2 Dimensions: 1,500 km west to east Diverse geography and climate
Large, young, and growing population Source: EIU (Economist Intelligence Unit) Source: UN 2010 population Turkey: 75 mln Young population: 50% aged < 25 years old Growing population: trend to continue, albeit at lower pace Turkey: sharp contrast with decline other European markets Population Turkey to reach 80 million by 2020
Household formation and urbanisation Source: EIU (Economist Intelligence Unit) Source: TUIK High rates of household formation Young adults leaving parents and establishing own families Gradual lower average number of household members Urban households average smaller than rural households Ongoing urbanisation: increasing focus on regional centers Large urban network spread throughout the country
Political structure
Foreign policy: EU, balance between west and east Governed by moderate islamist party since 2002 President: Abdullah Gul (AKP), Prime Minister: Tayyip Erdogan (AKP) Other parties: CHP, MHP, BDP, DSP, ANAVATAN, DYP Next Presidential elections: 2014, next elections for Parliament: 2015 Key political issues: Debate about influence Islamists versus secularists Political & legal reforms: new constitution, press freedom Economic reforms economic stability
Geopolitical position of Turkey
Economics
GDP: volume and growth Source: Eurostat Source: Oxford Economics Turkey among Top-7 economies in Europe and among G-20 economies in the world. Shift from unstable emerging economy to more settled fundamentals in last 10 years. Despite structural weaknesses (current account), Turkey weathered 2008-2009 global crisis well. Economy diversifying into high level services and export based industries.
Inflation and current account Source: EIU Economist Intelligence Unit Source: Oxford Economics Turkey developing to more stable economy after 2002 from hyperinflation economy in the 1990s. Inflation rate on average around 8% Sensitive for commodity price and currency changes. Key issue: current account deficit: indicator of further need for reforms
Well managed public finances Source: EIU Economist Intelligence Unit Source: EIU Economist Intelligence Unit Fundamental macro-economic changes after 2001 crisis. Macro-economic policies focused on balanced budget and reduction debt as % GDP. 2008 global crisis: position Turkey favourable thanks sound macroeconomics and solid banking system.
Growing international trade & investments Source: Oxford Economics Source: Oxford Economics Strong growth domestic demand pushed up imports (recovery) Exports: continuing build up of markets in Middle east and Russia, though Europe remains main export market. Increasing number of visa agreements with Russia and countries in Asia and Africa make markets better accessible to Turkish business men. Initial FDI recovery from global crisis in 2010, but slowdown in 2012.
Consumption and consumer confidence Source: EIU Economist Intelligence Unit Source: TUIK Growing middle and upper middle classes 10 years AKP government paid well of for lower income groups Wealth spread further into second tier and third tier cities Consumption confidence in 2011 and 2012 period fluctuating around 92.
Purchasing power map of Turkey Source: GFK Geo-Marketing
Purchasing power map of Europe Source: GFK Geo-Marketing
Purchasing power density map of Europe Source: GFK Geo-Marketing
Turkey among larger retail markets in Europe Source: Mintel Source: Mintel Turkey among largest retail markets in Europe in terms of sales volume Therefore attractive destination market international retailers Turkey mid level market in terms of retail spending per capita: after Central Europe, but before Southeastern Europe and Baltics
TURKISH RETAIL: traditional
and modern
with growing market share organised retail
Lot ofinternational and
Local retail brands active in the market
Retail sales perspectives Source: EIU Economist Intelligence Unit Source: EIU Economist Intelligence Unit Autonomous growth drivers: Wealth growth Population growth Household formation. Source: EIU Economist Intelligence Unit In combination with ongoing modernisation Turkish retail trade: shift from bazaar to shop
Key growth market in European market space Source: GFK Geo-Marketing Source: GFK Geo-Marketing Accelerated expansion Turkish retail chains Continuing international retailer interest in Turkish market About one third of total private consumption in Turkey spent on retail
Shopping centres
Evolution of shopping center supply in Turkey Source: Sosyal - JLL Source: PMA Standing stock: almost 8 mn m2 gla 103 m2 per 1,000 inhabitants Development boom in 2004-2008 years, and after 2010 Developers: combination of Turkish and international players.
Shopping center supply in international context Source: Cushman & Wakefield Source: Cushman & Wakefield Turkey: fast growing shopping center property market in Europe Supply density per 1.000 inhabitants still moderate when compared to other markets. Over supply in some sub markets. Further differentiation and conceptual innovation essential.
Prime shopping center rents and yields Source: JLL Source: JLL Yield for prime shopping centers in Istanbul stable at 7%, but no substantial references in the market in the last years. Yield correction after 2008 crisis limited because of lack of distressed sales Some upward pressure on rents since 2010 H1 Increased differentiation in rents and yields because of quality differences and location
Why Turkey? Combination of volume and growth Together with ongoing urbanisation and household formation Drives retail Continues to create demand for retail and meeting locations Ensures long term success for projects with strong fundamentals Turkey offers a bright future for those committed to the market
Conclusion: Turkey: an exciting market Dr. Herman J. Kok MRE Research & Concepts International Markets T +31 182 690917 hkok@multi-development.com