As of June, the overall office supply in Istanbul reached 7.12 million square meters, with the occupancy rate climbing to 89.7%, the highest level in the last 12 years.

According to the "Real Estate Market Outlook" report, prepared by Cushman & Wakefield | TR International and covering the first half of 2024, developments during this period bolstered international investors' confidence in Türkiye.

In the first quarter, the gross domestic product (GDP) grew by 5.7% compared to the same period in 2023, while credit rating agencies updated Türkiye's credit rating and outlook following the economic measures taken by the country.

Fitch raised Türkiye's credit rating from B to B-plus after 12 years, while Moody's confirmed it at B3. Both agencies changed the credit outlook from stable to positive. Standard & Poor's (S&P) also upgraded Türkiye's credit rating from B to B-plus, maintaining a positive outlook.

Along with these developments, Türkiye's five-year credit default swap (CDS) premium, which had risen to 900 basis points, fell to 250 for the first time in four years. The Financial Action Task Force (FATF) removing Türkiye from the gray list enhanced the country's economic stability and reinforced its reliability among international investors.

Top office rents in Levent, Anatolian side

According to the report, which examines developments in the economy, office, retail, industrial and logistics, and residential sectors in the first half of the year, trends in commercial real estate favored property owners.

The increase in commercial real estate rents reached 77% in the office market and 100% in the industrial market in the second quarter compared to the same period in 2023.

The highest office rents on a per-square-meter basis were recorded in Istanbul's Levent district at $42 per month, followed by Istanbul's Anatolian Side at $35 (TL 1,990), the Esentepe-Gayrettepe area at $32 and Maslak at $30. In Izmir and Ankara, this figure stood at $18.

Occupancy rate rises to 89.7%

As of the second half of the year, the overall office supply in Istanbul reached 7.12 million square meters, with vacancy rates hitting their lowest level in 12 years. In other words, office occupancy rates climbed to 89.7%, the highest level in the last 12 years.

The lack of new office investments for some time has increased interest in flexible office solutions, and flexible office spaces have continued to grow in Istanbul. Especially preferred by small startups, flexible offices have also started to be chosen by large-scale companies to reduce costs and offer different office options. This situation once again highlighted the importance of the flexible and cost-effective nature of flexible offices.

In the office market, the inability to meet high demand adequately and the strong interest in A-class office buildings have shifted the real estate cycle in favor of property owners.

The total office leasing transactions in the first half of the year reached 138,597 square meters, marking a 32.9% increase in square meters compared to the same period in 2023. With the full opening of the Istanbul International Financial Center, supply is expected to increase, and investments are expected to accelerate in the medium term.

According to the report, in the retail sector, rent levels on main streets and primary shopping centers remained at the same level as last year. The highest primary rents on main streets were recorded in Istanbul in June at $250 per square meter per month, followed by Ankara at $105 and Izmir at $100.

In the first half of the year, the total shopping mall supply was recorded at 441 units and 13.98 million square meters. By the end of the year, the number of shopping malls is expected to increase to 452.

Despite high occupancy rates and limited supply in main streets and shopping malls during January-June, brands continued their growth strategies.

International brands put Türkiye back on their radar for growth, with major trends in retail in the first half of the year, including concept stores, luxury retail, and temporary (pop-up) stores.

In the warehouse leasing activities, 179,700 square meters of leasing transactions were recorded in the first half of the year, representing a 138% increase compared to the same period in 2023.

The report also showed that companies in the manufacturing and e-commerce sectors carried out the major leasing transactions in the first half of the year.

Accordingly, while the supply of quality warehouses remained limited, users mainly increased their demand for warehouses with large enclosed areas.