Propin Property Investment Consultancy, a full-service property consultancy firm providing brokerage services, sales, lease and marketing as well as market reports and property development consultancy for developers and investors in the office segment, has prepared its 2012 Istanbul Office Market Report for the second quarter.
The report covers changes in the office market in April, May and June and prescience for the coming quarters.
According to the report, the second quarter of 2012 has been quite active for Istanbul's office market. Propin sums up the developments during the second quarter of 2012 as follows:
When the office market's general vacancy rates are analyzed, it can be considered as a significant fact that though current stocks have increased due to inventory receipt in the market for the last third quarters, the vacancy rate for class-A office buildings in the CBD was around 11.1%.
When the general average rent rates for Istanbul's office market are analyzed, it is seen that, in the CBD Out of Europe, the average rent has decreased to the lowest level seen in the last year whereas in the CBD Out of Asia, the rent average has stabilized.
The general vacancy rate in the CBD (Central Business District) has been observed at 11.1% for class-A buildings and 6.4% for class-B buildings.
The average rent rates of office buildings in the CBD was around US $30/m²/month for class-A buildings and US $14.3/m²/month for class-B buildings.
Propin says that the law amendment concerning sales of real estate to foreigners has generated demand for investors with foreign capital to purchase currently rented commercial properties. It is seen that due to the landlords' demand of sales prices, which return off between 16 and 18 years, a large number of transactions were unable to be completed.
Propin informs that most of the large-scale projects located near main access roads, though these projects happen to be located away from the center, include the office functions. In addition to this, all office projects that are to take place in the market between 2013 2015 and located in the CBD and around, have A and A+ specifications.
When the aforementioned case is analyzed through the supply-demand equilibrium, it is seen that the supply level is higher than the demand level. Due to this reason, Propin recommends the investors and developers to also develop new office buildings with low initial investment cost, low-key and office buildings that favor tenants with functional and low rental budget. In the contrary case, Propin believes that due to the excrescence of class-A projects, both parties may be confronted with possible difficulties in rental processes.
Propin stated in prior report that office areas of 1.4 million m², which are expected to be included in Istanbul office stock by the end of 2014, will create a serious competition particularly in the CBD. In addition to that, Propin also believes that these new projects, equipped with high qualities, will engage in a competition not only with the other new projects but also with the old office buildings.
As a result based on this competitive environment, we believe that listed rental prices for old buildings will decrease notably within three years duration.