Examination of rental trends in Istanbul A class office market

Due to the fact that headquarters of the most of the multinational companies as well as the main service sector and economic activity are located in Istanbul, and in secondary cities office usage are limited only with local production companies solve their office needs within their production facilities, there has not been a large number of office stocks of measurable quality outside of Istanbul. For this reason, most of the A class office stock in Turkey is clustered in İstanbul. Despite the increasing stock in İstanbul in recent years, demand has decreased significantly. The most important reason for the decreasing demand in the İstanbul Office Market is the decrease in the interest of foreign companies in Turkey. On the other hand, a large number of foreign companies, which started their operations in Istanbul before with a small organization and aimed to grow, stopped their operations in Turkey and closed their offices in 2017 (JLL, 2017b). In addition some of the foreign companies which continues their operations in İstanbul with a small management or a branch offices prefered to relocate to serviced office spaces from their permanent offices. The reasons behind this choice are the flexibity of the termination of the serviced office leases and because the serviced offices are already decorated spaces. Arising from several reasons office market has been improved between 2012 and 2014 and regressed starting from 2015 to today. Annual A class office take up was between 200.000 and 250.000 m2 before 2014. But it has been dramatically dropped below 140.000 m2. Rent amounts in all office districts has been decreased because of the decreasing demand, increasing building supply and the increasing competition and as of 2017 it has been reached the lowest historical levels in American Dollars. As a result of the decrease in demand, surplus office Stock was comprised which resulted in increasing vacancy rates in all regions and decreasing rent values. In particular, vacancy rates have increased to over 50% in some regions, and economic losses have been incurred not only for the office building developers and the individual investors who have invested in office spaces from newly developed projects, but also for the general public. In orer to minimize these losses, it has become even more important to examine the demand before developing a new office building and to develop the right project according to needs and requirements of the demand. Within the scope of the study, the characteristics of the Istanbul office market were tried to be determined through office leasing transactions between 2012-2017. According to the results obtained from the inference of these characteristics, it is aimed to restrict the negative impacts of new investments in the Istanbul office market on investors and the public in terms of economy and environment and to prevent inefficient investments. The thesis consists of four sections. In the introduction section of the thesis the purpose, scope, collection of data and the method used in the study were included. In the second part, office and office building terms were defined in general and various office classification criteria are included. The historical development of the office market in the world and in Istanbul was examined and the amount of A class office supply, rental rates and vacancy rates in the central business districts of today were assessed with the data in the current market conditions. The classification of office buildings in global markets and in Turkish real estate market has been presented. In the third part, the method used in the research, determination of sample size, data collection and analysis method were explained, 624 rental transactions between 2012-2017 were assessed and findings were presented. In the fourth part major findings derived from all transaction data and an overall assessment was made and recommendations were given based on review and analysis. With respect to the results of this study that examining rental trends in A class office market of Istanbul, some of the main findings are: - Lease transactions below 200 m2 and above 7.000 m2 are very rare for Istanbul office market. - 1.500 m2 floor plate with divisable to smaller parts is reccomended for new office building developments. - 419 leases out of 624 are signed between $10-$25/m2/month. - Big sized transactions are signed with lower rents. - Levent is the main CBD of the Istanbul. If the rents are decrease in Levent district than the demand in secondary districts close to Levent are decrease as well. - Kozyatağı-Ataşehir, Levent, Maslak and Ümraniye districts are hosted most of the transactions between 2012-2017. - İstanbul Doğu and İstanbul Batı hosted less transactions between 2012-2017. - Tenants prefer to relocate to A class offices from both A and B class existing offices. Even C class tenants are not relocating to B class but relocating to A class offices. - Tenants relocate to European Side from European Side only but relocate to Asian Side from both Asian Side and European Side. - Lease transactions are increasing in first quarter of the year and decreasing during the third quarter of the year due to summer holidays.