Turkey has undergone a profound economic transformation over the past decade and its economic fundamentals are quite solid. It is the 17th largest economy in the world and the 6th largest economy in Europe, with a GDP of approximately USD 800 billion in 2014.

The demand drivers of the Turkish real estate sector include the country’s advantageous geographical location; extensive urban renewal and development; large capacity and strength in the construction sector; population growth and demographic advantage; increasing per capita income; and ease of doing business. The real estate sector accounted for a 4.6 percent share of GDP in 2014 – an increase of 2.6 percent compared with the previous year. On the investment side, FDI inflow rose to USD 12.5 billion, with real estate and construction garnering USD 4.3 billion of total FDI in 2014. The total number of houses sold in the property market reached 1,165,381 units in 2014; likewise sales of real estate to foreigners began to increase following the cancellation of the reciprocity law.

The current situation, along with strategic plans and future projects in the pipeline, offers huge potential for investors in Turkey’s real estate sector. According to the Knight Frank Global House Price Index, which allows investors and developers to monitor and compare the performance of mainstream residential markets across the world, in the first quarter of 2015 Turkey ranked second only to Hong Kong in the 56-location index. In terms of the annual price growth index, with an 18.5 percent rate of increase, Turkey emerged as the best-performing housing market in Europe, ahead of Ireland, Luxembourg, Estonia, and Iceland. Urban renewal and mega projects dominate the agenda for the foreseeable future, particularly in Istanbul with projects such as Marmaray, Canal Istanbul, the third Bosphorus bridge, and Istanbul’s third airport.

Turkey’s office space market, one of the most important dynamics of the real estate sector, holds huge potential for investors. Office construction licenses obtained throughout Turkey increased by 27 percent, hitting 6.84 million square meters. Class A office space supply is expected to reach 6.5 million square meters by the end of 2017 with the completion of projects like the Istanbul Finance Center. Initiated in 2009, the Istanbul Finance Center is a project to build and create a financial district in Istanbul that will become both a regional and global financial hub. The expected cost of the project will be approximately USD 2 billion. According to projections, the Istanbul Finance Center will provide employment for 30,000 people. Once completed, the financial district will be larger than its counterparts in New York and London.

As a well-known tourism destination, Turkey is the 6th most popular tourist destination in the world. From 2002 to 2014, the number of international tourist arrivals increased 200 percent to 39.8 million. By the end of 2014 there were 13,436 registered accommodation facilities, accounting for a combined capacity of more than 1,250,000 beds. There are currently 281 projects in the pipeline that would add 74,130 much needed beds to Turkey’s short supply. As of 2014, there are more than 165 hotel chains in Turkey, with 15 percent of these hotels being owned by international investors.

Moving to the retail market, remarkable growth has been driven by high retail demand. Oxford Economics’ forecasts indicate a 3.2 percent growth in retail sales between 2014 and 2018, higher than mature European markets. There has been a 7 percent increase in leasable areas in the retail sector, from 9.49 million square meters to 10.24 million square meters. At the end of 2014, there were 350 operational shopping centers in Turkey. The number of shopping centers, including the projects that have already been announced, is expected to exceed 400 by 2017. Combined, these centers would account for 12.5 million square meters of rentable area. Istanbul will definitely continue to maintain its charm for retail investors in the coming years. The Istanbul Metropolitan Area has 104 shopping centers with a total gross leasable area of 3,809,736 million square meters. With these figures, according to JLL’s Cross Border Retailer Attractiveness Index 2015, Istanbul is the 7th most attractive market in Europe after London, Paris, Moscow, Milan, Madrid, and Rome. Yet compared to the European average of total leasable area per person, Turkey is hovering below the average. This shows potential for further retail growth in Turkey.

Apart from the above factors, one of the most important sub sectors, which will affect real estate market potential very positively in the near future, is urban renewal. The population growth and fast urbanization trend in metropolitan cities play vital roles in increasing the volume of urban renewal projects and the housing renewal process. It is estimated that around 6.7 million units nationwide will be demolished and rebuilt over the next 20 years, meaning an average of 334,000 units per year. Around TRY 44 billion (USD 15 billion) of financing will be required each year for urban renewal projects. In total, a budget of USD 400 billion has been allocated for this initiative, with the private sector taking the lead role.

As one of the most promising real estate markets in Europe with a large number of projects attracting international attention, it is no wonder Turkey has been named the Country of Honor for the second year in a row at MIPIM (the world’s property market) in 2014.

Some of the key facts and figures in the Turkish real estate sector include:

350 shopping centers are operational in Turkey with a total gross leasable area of 10.24 million square meters.
104 shopping centers in Istanbul with a total gross leasable area of 3,809,736 million square meters represent 37 percent of the total leasable shopping center area in Turkey.
Office construction licenses obtained throughout Turkey have reached 6.84 million square meters of office space.
According to the Turkish State Railways’ (TCDD) investment program, USD 240 million will be spent on building logistics centers.
By the end of 2014, there were 13,436 registered accommodation facilities. 9,188 of these facilities were licensed by their respective municipalities, while the remaining 4,248 held tourism operation licenses. The combined total bed capacity of these facilities exceeds 1,250,000, although there is still a gap between supply and demand, particularly in Istanbul.
There are currently 281 projects in the pipeline that would add 74,130 much needed beds to Turkey’s short supply.

Strategically situated at the crossroads of Europe, the Middle East, and Central Asia, and home to almost 78 million people, Turkey has easy access to 1.5 billion consumers and has undergone a profound economic transformation over the past decade. The country is a major energy corridor and serves as a terminal connecting Europe, Central Asia, and the Middle East. With its favorable location, existing potential, mega projects, and ambitious targets for 2023, Turkey offers great opportunities for investors by combining a large construction sector with growing commercial and industrial output.