Overview. Turkey Real Estate Overview - Q

Transcription

1 Turkey Real Estate Overview - Q Overview Political Situation The upcoming general elections to be held on the 12 th of June, which would result in the election of 550 new members of Parliament, stands out as the most significant local political event in Different from the previous ones, these elections bring a novelty by reducing the age of parliamentary eligibility to 25 from 30. According to recent polls, the ruling party AKP is expected to win the elections with a great majority. The establishment of a new constitution is on the agenda of AKP after the elections. At the international level, the unrest and political disorder in the MENA region intensively occupies Turkey s foreign policy agenda since the beginning of 2011 due to the important role of Turkey as the big brother in the region. The turmoil in the region may cause some multinational companies to shift some of their investment plans from MENA to Turkey. Economic Situation Following the economic contraction in 2009, Turkish economy strongly recovered in 2010 and recorded an 8.9% GDP growth, which was much higher than the original projections. This growth placed Turkey amongst the top three economies amongst the G20 countries. The IMF have recently revised upward the 2011 growth projections for Turkey to 4.6% compared to 2.0% for Europe and 3.7% for the Emerging Europe. GDP Growth 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 7.0% Q % 0.9% Q Q Q % Q Q % -2.9% Q % Q % 10.2% Q Q % Q % Q One of the major economic developments during Q was the Central Bank s statement that the policy rates will remain stable in the medium term, while significant increases have been announced in reserve requirement ratios, in order to reduce TL liquidity in the market. In line with the economic growth performance in 2010, there has been some improvement in unemployment. The unemployment rate decreased to the pre-crisis levels, reaching 11.9% pointing to a 210 basis points decrease since the end of Despite this improvement, unemployment is still projected to remain as a major weakness in Labour Market: Unemployment Rate (%) 17.0% Feb-09: 16.1% 16.0% Jan-10: 14.5% 15.0% 14.0% 13.0% Dec-10: 11.4% 12.0% Jun-10: 10.5% May-08: 8.9% 11.0% 10.0% 9.0% 8.0% Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Source: Turkish Statistical Institute Following the upward trend in 2010, consumer confidence continued with its progress during Q1 2011and this trend is expected to remain during the rest of the year. As of Q1 2011, the index reached the pre-crisis level for the first time in the last 2 years, leading to a positive perception in the investment market % -14.5% -20.0% Source: Turkish Statistical Institute

2 Pulse Turkey Real Estate Overview - Q Consumer Confidence Index 100.0% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Source: Turkish Statistical Institute The improvement in consumer confidence was reflected on the retail turnover figures. According to the Turkish Shopping Centre and Retailers Association, non-food retail turnover recorded a real growth of 8.2% between 2009 and Besides, positive results of İstanbul Shopping Festival are expected to affect retail turnover level between mid-march and late April with an increase around 20%. One of the recent legislative changes expected to affect the Turkish commercial real estate market was the announcement of the new Code of Obligations. Although it is not yet effective and the applications of the courts, especially the interpretation of the Supreme Court, are yet to be seen, it is obvious that the new Code of Obligation brings more protection to the tenants against the landlords. Having said that the interpretation of the Supreme Court will be crucial, we assume that the market players will start considering the new legislation for the new and renewed commercial lease agreements with implications such as replacement of the cash deposit by bank guarantee letters or switching to TL based contracts due to the restrictions of indexation in foreign currency contracts. Retail Turnover Growth (Y-o-Y) 30.00% 27.01% 25.00% 20.00% 15.00% 16.25% 12.79% 10.00% 5.00% 0.00% 11.01% 6.62% 8.21% 4.27% 8.91% 4.59% 3.87% 1.90% 15.38% 10.61% 8.20% 21.52% 18.49% General Food Non Food Ready Wear Source: TSCR İstanbul, representing the centre of the economic growth in Turkey, also continues to strengthen its strong position as a regional financial centre. The plan to relocate the state banks headquarters and financial regulatory authorities from Ankara to İstanbul, which started to be implemented by the government with Halkbank being a pioneer, is expected to create an alternative CBD on the Asian side of the city in the near future. In addition, İstanbul as a preferred destination for real estate investors, took the first place as the city with the best improvement in the ranking of 2010 Global Finance Index.

3 Pulse Turkey Real Estate Overview - Q Retail Market Overview The retail market continued to improve in Q1 2011, getting closer to the pre-crisis performance levels. The GLA growth was 264,000 sq m during Q compared to 82,000 sq m during Q The majority of the GLA increase was seen in Istanbul with a growth of 198,000 sq m. The GLA growth of Q in the rest of Turkey remained lower than İstanbul, at 66,000 sq m. The GLA growth of Istanbul showed 7% increase, while the GLA growth in the rest of Turkey portrayed a slight slowdown, decreasing at 2.1% during Q over the same period in Seven shopping centres opened in all over the country during Q1 2011, with four of them being located in Istanbul. Forum Marmara is one of the most significant openings with its significant GLA. The centre encompasses a GLA of 137,000 sq m and is anchored by strong brands such as Bauhaus, Tepe Home, Media Saturn, Carrefour and Boyner. Sapphire, which is the tallest building in Europe, located in the CBD, accommodates a shopping centre with a GLA of 31,000 sq m. Demirören Centre was another significant opening, being situated on the İstiklal Street with a GLA of 19,422 sq m. Shopping Centre Development End 2009 Q End 2010 Q Unit İstanbul Rest of Turkey Turkey GLA (sq m) 2.28 M 2.28 M 2.65 M 2.85 M Unit GLA (sq m) 3.41 M 3.50 M 3.87 M 3.93 M Unit GLA (sq m) 5.69 M 5.78 M 6.52 M 6.78 M İstanbul accounts for 42% of Turkey s retail stock with a GLA of 2.85 million as of March 2011, while the retail stock in the rest of Turkey is recorded at 3.93 million sq m, leading to a total leasable area of 6.78 million sq m in the whole country. Considering the pipeline projects that are currently under construction, the retail stock in Turkey is expected to rise by 33.8% to reach 9.07 million sq m by Of the pipeline stock, 1.02 million sq m will realise in İstanbul and 1.27 million sq m in the rest of Turkey. Shopping Centre Development İstanbul Rest of Turkey Turkey * As of end 2013 Activ e Under Construction* Total Unit GLA (sq m) 2.85 M 1.02 M 3.87 M Unit GLA (sq m) 3.93 M 1.27 M 5.20 M Unit GLA (sq m) 6.78 M 2.29 M 9.07 M Trends The number of shopping centres in Turkey has increased by 32 since Q and reached 270 as of end-march As presented in the following table, 33.1% of the retail GLA stock in Turkey is in the form of regional centres, followed by 27.8% in the form of neighbourhood centres. During Q1 2011, all retail types excluding Power Centre or Theme/Festival Centre increased in terms of unit number and GLA. Despite the nominal increases, their share in the total remained unchanged or decreased except for the Super Regional Centres which showed an increase of 1.8% in terms of GLA compared to the previous year. Breakdown of Shopping Centre by Type Q Q Type Unit % GLA (sq m) % Unit % GLA (sq m) % Regional Centre % 1,902, % % 2,243, % Neighbourhood Centre % 1,677, % % 1,887, % Super Regional Centre % 1,097, % % 1,413, % Outlet Centre % 969, % % 1,079, % Power Centre 1 0.4% 42, % 1 0.4% 42, % Life Style Centre 6 2.5% 50, % 8 3.0% 86, % Theme/Festival Centre 3 1.3% 30, % 3 1.1% 30, % Total 237 5,770, ,782,726 Market Density As of March 2011, İstanbul s retail density reached 215 sq m per 1,000 capita, surpassing Ankara having a retail density of 202 sq m. Following İstanbul and Ankara, Denizli became prominent as the third densest city with 154 sq m. Considering the projects in the pipeline, İzmir is expected to have a strong increase in retail density, surpassing Bursa and almost reaching the density level of Tekirdağ by the end of 2013.

4 Pulse Turkey Real Estate Overview - Q Retail Density GLA per 1,000 Capita, Turkey City End 2010 Q End 2013 İstanbul 200 sq m 215 sq m 280 sq m Ankara 202 sq m 202 sq m 239 sq m Denizli 118 sq m 154 sq m 166 sq m Bursa 130 sq m 130 sq m 135 sq m Tekirdağ 139 sq m 139 sq m 132 sq m İzmir 112 sq m 118 sq m 130 sq m Eskişehir 116 sq m 116 sq m 111 sq m Adana 59 sq m 59 sq m 86 sq m Turkey 88 sq m 92 sq m 118 sq m Amongst the countries in the advanced Europe, Turkey still remains as one of the low density retail markets, however, considerable improvement in the retail market carried Turkey one rank higher, above Belgium since the same period last year. shoe chain Payless and the music market Virgin opened their first stores in İstanbul during Q Additionally T-box introduced its new concept of large scale stores in Sapphire, Marmara Forum and Torium. In terms of food and beverage the most significant international entry was the opening of the American southwest grill chain Moe s. It has been seen in the market that anchors have continued their strong growth in Q1 2011, both in İstanbul and the rest of the country. Bauhaus introduced its 12,000 sq m store, and Carrefour opened up its first store with its new, extensive concept in Marmara Forum, while Migros has been opening more compact stores under the name of Jet Migros. Retail Density GLA per 1,000 Capita, Europe Netherlands Ireland Sweden Luxembourg Finland UK Spain Portugal France Italy Czech Poland Slovakia Germany Hungary Turkey Belgium Russia Bulgaria Romania Greece Ukraine Retailer Demand Retailer demand remained strong during Q in line with the positive economic outlook. While location remains as one of the most critical factors affecting the expansion plans of retailers, many brands are strongly focusing on innovation, especially through development of new concepts is expected to be a strong year in terms of attracting international brands to the Turkish retail market. H&M continued with its aggressive expansion plan and opened 3 stores in March, totalling 5 stores in İstanbul. Michael Kors and Marc by Marc Jacobs are the two luxury brands, which announced their opening plans of their first stores in İstinye Park. The affordable Tekzen, an important DIY brand, opened four stores in Q1 2011, three of them being in the secondary cities. Adese, the local food hypermarket dominantly active in the secondary cities, has announced ambitious expansion plans for Additionally, Bimeks is in preparation for an IPO which is likely to be followed by an aggressive expansion, and Ikea is getting ready to open its fifth big-box in Ankara in Q3. Nişantaşı, Bağdat and İstiklal Streets continued to be highly demanded by retailers while availability of space remained as the most critical issue causing increases in the unit store rents. Many brands are willing to take space in the prime high street locations despite the high rent levels, and some others direct their expansion plans towards the prime shopping centres. A major transaction in street retail realized in Nişantaşı during Q quarter, involving the lease acquisition by Bally, which is expected to open soon. In addition, Lacoste opened its first store with the new Lacoste Live concept in İstiklal Street.

5 Pulse Turkey Real Estate Overview - Q On the other hand, the interest of Turkish retailers in the international markets, especially in the closer region, remains strong. Due to the political instability in some MENA countries, Turkish retailers expansion plans shifted towards Eastern European and UEA countries; however, it is projected that the strong demand for Middle Eastern markets will regain torque in the near future. Rental Growth Outlook Prime rent has shown a slight increase, reaching EUR 80 per sq m/month in Q compared to EUR 75 per sq m/month during The prime rent level in the secondary cities is around EUR 45 per sq m/month, while it is expected to reach around EUR 50 per sq m/month by the end of the year. Rent levels are expected to gradually increase through 2011, getting closer to the pre-crisis rent levels in 2007 at EUR 90 per sq m/month. Prime Rent ( EUR / sq m / month) Investment Trend On the back of increased investor interest in the Turkish real estate market, we believe that the retail market will be the prior to record investment transactions in However, seeing the significant increases in retail turnover and the projections for strong growth in the medium term, there is a risk of significant downward revisions in yield expectations of local vendors. In this respect, based on the potential deals in which Jones Lang LaSalle have been involved, it is estimated that the prime yields have recorded 50 basis points decrease during Q and reached 7.50%. For prime assets, we believe that there are some local and international investment funds, which can seriously consider offering such yield levels. However, matching the yield expectations of both sides remains as the key issue for investment deals in the market. Prime Yield Trend 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 1Q Q Q Q Q Q 2010 Q End 2006 End 2007 End 2008 Q Q Q Q Q Q Q Q Q In line with the increasing demand and the lack of available prime space, rent levels on the high streets are expected to follow an increasing trend in An increase around EUR 10 was recorded on the high street prime rents during Q The prime rent in Nişantaşı remains the highest at EUR 170 per sq m/month compared to Bağdat and İstiklal Streets at EUR 130 per sq m/month and EUR 150 per sq m/month, respectively.

6 Pulse Turkey Real Estate Overview - Q Office Market Overview İstanbul Office Market Total Grade A completions estimated at 62,000 sq m during Q have almost tripled compared to the same period in The majority of the new supply was on the Asian Side at 50%. There were no completions in the CBD during Q while the only completion in the non-cbd Europe was Garden Office (Marmara Forum) with 30,000 sq m leasable space. Major Completions in Q1 2011, İstanbul Project Region Sub Market GLA(sq m) Garden Office Marmara Forum Non-CBD Merter 30,000 Akkom Plaza Asian Side Ümraniye 32,000 The completions during Q increased the Grade A office stock to 2.6 million sq m in İstanbul. Of this, 70% situated on the European side. The non-cbd Europe and the Asian Side account for 60% of the total stock. The Grade A project completed on the Asian side was 32,000 sq m Akkom Plaza 2 in Ümraniye. Existing Grade A Office Stock Sub Market GLA (sq m) Europe CBD 1.1 million Asia Total Non CBD 0.73 million 0.80 million 2.6 million The main pipeline project expected to be completed in Q is Trump Towers located in the CBD offering 35,000 sq m office space. The pipeline stock, which is expected to enter the market in 2011 is 360,000 sq m. Almost half of this is located on the Asian Side while another 29% accounts for the non-cbd Europe and 22% for the CBD. Another 260,000 sq m of new supply is expected to enter the İstanbul office market during 2012 and The total Grade A office supply in İstanbul is estimated to reach 3.2 million sq m by Pipeline Grade A Office Stock* Sub Market GLA (sq m) Europe CBD 207,000 Non CBD 185,000 Asia 229,000 Total 621,000 * For completion by end 2013 Major pipeline projects which are expected to be completed during the remainder of 2011 are Buyaka in Ümraniye with 51,000 sq m, Vizyon Kartal with 16,000 sq m in Kartal, Key Plaza with 8,500 sq m in the CBD and the Akkom Plaza Projects with 40,000 sq m in Ümraniye. The economic recovery positively impacted occupier demand, which was evident in take up volumes during Q Total take up of Grade A space during Q was 38,000 sq m compared to 11,000 sq m during Q Strong occupier demand is expected to continue in 2011 with some implications on rent levels. Total Take up Volume sq m 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,000 6,000 Q Q ,000 Q ,000 Q ,000 14,000 Q Q ,000 Q ,000 Q ,000 Q The CBD experienced strong occupier demand in the Q1 2011, and on a sub-market basis, the CBD recorded the highest take-up accounting for 50% of total take up volume while the non-cbd Europe accounted for 32%, and the Asian Side accounted for 18%. The major transactions in the CBD during Q were lease acquisitions of 4,000 sq m by an international healthcare company in Levent Ofis and 6,500 sq m space by a local bank in Barbaros Plaza. The largest take up during this period was the lease acquisition of 12,000 sq m space by a reputable Turkish Company in Gisad Plaza located on the Basın Ekspress Road, Bahçelievler.

7 Pulse Turkey Real Estate Overview - Q Total Take up Volume GLA (sq m) Share Europe CBD 19, % Non CBD 12, % Asia 7, % Total 38,000 Prime Rent (EUR / sq m / month) Prime Rent ( / sq m / month) The vacancy rate of 7% for İstanbul in Grade A offices, indicates 800 basis points decrease compared to Q In line with the increasing occupier demand, the vacancy rate recorded the lowest rate in CBD at 2.8% which came down from 3.6% by the end of The non-cbd Europe records the highest vacancy in İstanbul at 15.4% as of Q although it decreased from 16,9% as of end The vacancy rate on the Asian Side decreased from 5.6% as of end 2010 to 5.3% during Q Q Q Q Q Q Q Q Q Q Q Q Q Q It is expected that, particularly in the CBD there will be a landlord friendly market until the pipeline stock enters the market by end Then the market will be more balanced in 2013 and a tenant friendly market could come into existence in Vacancy in CBD, Grade A 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q Q Q Q Q Q Q Q Q The general election could lead to a stagnant office market for a short period, but on the other hand, multinational companies, currently operating in the MENA region may shift some of their office demand to İstanbul due to the political instability in the region. Investment Market The office market has attracted a particular attention from global investors since Q The lack of institutional investment products and aggressive yield expectations of the local vendors, as in the retail market, have prevented this interest turning into a transaction. Despite this, two deals were completed during Q However, neither of these deals involved an international investor due to the said reasons. The market has not seen any major movement in prime rents since Q and the rent level stayed at EUR 30 sq m/month. However, there are strong signs for rental growth due to the limited supply especially in the CBD and increasing occupier demand. For example, rent levels in Ümraniye have increased more than 20% during the last two quarters to above USD 20 per sq m/month as of Q (Due to the parity fluctuations, landlords prefer to quote rent levels in USD.) The transactions were the disposal of the RBS building in Etiler- part of CBD- at a gross yield of 7.4% and disposal of Akbank Towers in Maslak with 29,000 sq m leasable space, acquired by Orjin Group at around USD 95 million.

8 Pulse Turkey Real Estate Overview - Q Seeing the strong investor interest, we believe that investment in development projects by international investors is a more likely option for the prime office market than investing in existing assets. A few transactions in the office market, in this structure, are likely to happen during the remainder of Based on potential deals that Jones Lang LaSalle have been involved and the realised transactions point that the prime office yield also decreased by 50 basis points to 7.5% as of Q Prime Yield Trend (%) 8.2% 8.0% 7.8% 7.6% 7.4% 7.2% 7.0% 6.8% Q Q Q Q Q Q Q Q Q Q Q Q Q1 2011

9 Pulse Turkey Real Estate Overview - Q Logistics Market Overview Remaining stable in the recent years, the logistic sector holds a positive outlook in the medium term. The rapid development of the logistic sector was one of the significant issues mentioned at the World Economic Forum in Davos. The Turkish logistics sector was mentioned as one of the world s fastest-growing logistics markets as well as being placed among the fastest growing 10 countries in Davos. Major Logistics Sub-Markets in Turkey Tekirdağ Balıkesir İstanbul Uşak There are also many infrastructure and logistics projects planned by the government in major cities located on the main transportation hubs such as İstanbul, Erzurum, Samsun, Mersin, İzmit, Kayseri, Tekirdağ, Balıkesir, etc. With the completions of these projects, it is expected that the quality of logistics space will improve and new submarkets will emerge. Occupier Demand Occupier demand showed some recovery in line with the economic revival in 2010; however, this has not been fully reflected on take up volumes and rent levels. There was no major transaction in Q1 2011, however, demand from 3PL (third party logistics) companies is expected to increase, and there is strong potential for transactions in the near future. İzmit Eskişehir Denizli Being located in the proximity of railways, motorways, major ports and airports, Hadımköy, Tuzla and Gebze are the most preferred logistic sub-markets in İstanbul. Additionally, the growth in the retail market is expected to lead some growth in occupier demand for logistics through Konya Samsun Kayseri Adana Mersin Erzurum Rental Outlook 3PLs, being the dominant occupiers and having the highest potential to realize future transactions have an indicative role in the market. Price remains as the most decisive factor in the process of leasing warehouses as 3PLs are very price sensitive and consider Grade B warehouses as a lower priced substitute. The prime rent level in the logistics market stayed stable around EUR 4.5-EUR 5.0 per sq m/month and the asking rent remained around USD 6-7 per sq m/month, indicating a prime rent at USD 6.5 per sq m/month during Q The tendency of landlords to quote rent levels in USD instead of EUR is becoming more common due to the parity fluctuations. The chart below points to a slight rise of rent levels between 2007 and Q1 2011, however, it should be noted that these fluctuations arise from the parity movements. Prime Rent (EUR / sq m / month) Q Q Q Q Based on our market information, the rent levels in the European Side are slightly higher than the rents on the Asian Side. The indicators point to prime rent around USD on the Asian side and USD 6-7 on the European Side, remaining the same since end However, as the occupier demand increases in a faster pace than the supply of logistics space, the rent levels are expected to rise by the end of Logistics Supply İstanbul is the largest and most developed logistics market in Turkey in terms of supply and quality. The logistics stock of the Asian Side is higher than European Side due to the comparatively low land prices and available land for logistics developments on the Asian Side. In terms of submarkets, almost half of warehouse supply on the Asian side is located in Samandira and Gebze, and almost half of warehouse supply on the European side located in Hadımkoy and surrounding of Esenyurt, İkitelli, Güneşli and Halkalı. Q Q Q Q Q1 2011

10 Pulse Turkey Real Estate Overview - Q There is limited supply in the pipeline, and they are mainly located in Gebze and Tuzla regions. Major development projects include: Logiturc Park, Tuzla- Istanbul, 122,000 sq m Ekol Logistics, Gebze Istanbul, 101,000 sq m Çelebi Logistics Park, Esenyurt - Istanbul: 55,000 sq m Investment Market The investment market is dominated by owner occupiers and local investors. The main activity in the market involves development projects based on a partnership between the developer and the landowner. Due to high land prices which makes logistics investments largely unfeasible, this method appears to be the only way in practice for new development. Despite the fact that the market is uninstitutional and seriously lacking high quality products, the number of global investors/funds looking out for opportunities in the Turkish logistics market has considerably increased. However, high land prices at the current rent levels continue to act as the main barrier. The number of sale and leaseback opportunities are also scarce while the investor interest for such opportunities is strong. For sale and leaseback transactions, our market intelligence points to yield levels between % and this could go much lower if the tenant is triple A and ready to sign a lease contract for 10 years plus.

11 Pulse Turkey Real Estate Overview - Q Hotel Market Overview Trading General İstanbul Market % Market conditions have noticeably improved since the beginning of 2010, especially in İstanbul luxury market, with positive implications on trading. Visitors In 2010, the international visitor arrivals to Turkey increased by 5.7% compared to This is mostly due to Turkey offering more economical options for travel compared to Eurozone and large conferences. The market continued to grow with a 16.5% increase during January-February 2011 compared to the first two months of 2010, as many tour operators are diverting their destinations from troubled areas in MENA to south of Turkey. International Visitors to Turkey 35,000 30,000 25,000 20,000 15,000 10,000 5, YTD Source: Ministry of Culture and Tourism Feb 10 Antalya continues to be the backbone of Turkish tourism and the YTD Feb 11 arrivals to the city increased by 8.9% during Q compared to the same period last year. The German and the Russian visitors represented 53.9% of the total arrivals to Antalya during the first three months. A 12.9% increase is observed in passenger traffic for Muğla-Milas International Airport during the first three months of the year, resulting from a 17.7% increase in domestic lines. International arrivals to the region are expected to increase during the high season. Trading İstanbul In 2010, the occupancy and ADR of the hotels in the city increased compared to the same period in 2009, 13.9% and 1.6% respectively, resulting in a 15.7% increase in RevPar. The RevPar increase trend continued during the first two months of 2011, showing a strong growth of 19.3% compared to the same period last year YTD Feb-10 ARR ( ) Yield ( ) Occupancy Source: Hotel Benchmark Survey STR Global, data not consistent 80% 60% 40% 20% 0% YTD Feb-11 The five-star European Side city centre international hotels in İstanbul Quality Market set enjoyed increases in both occupancy and rate, resulting in a 16.6% increase in RevPar in The governmental and corporate events had a positive impact on the occupancy of the hotels for the first two months of Trading İstanbul Quality Market YTD Feb-10 ARR ( ) Yield ( ) Occupancy Source: Source: Hotel Benchmark Survey STR Global, data not consistent 100% 80% 60% 40% 20% 0% YTD Feb-11 Outlook We believe that the visitor numbers for the country should continue increasing for 2011 as the home countries of major visitor groups to Turkey have positive economic outlook. This should result in both higher occupancies and rates in certain hotels in İstanbul. Development pipeline The slow down of the development activity helped both Turkey and İstanbul with trading. In terms of number of rooms, İstanbul is still dominated by five-star hotels. However, as Turkey does not follow international standards, some of these hotels may be considered four-star by international investors. Occupancy Occupancy

12 Pulse Turkey Real Estate Overview - Q Supply & Development March 2011 Total No of Rooms 40,000 38,000 36,000 34,000 32,000 30,000 28,000 Although over 4,200 rooms are expected to enter the İstanbul market by the end of 2011, we believe that some will be delayed. The Edition Hotel 26,000 24,000 22,000 20, f 2012f 2013f Existing Developments Source: İstanbul Metropolitan Municipality & Jones Lang LaSalle Hotels The most notable openings since the beginning of the year were 78- room The Edition Hotel in Zincirlikuyu, 247-room DoubleTree by Hilton in Moda and 171-room DoubleTree by Hilton in Old Town. DoubleTree By Hilton Istanbul Old Town Investment As the global markets recover, there is more interest in Turkey. However, unfortunately the gap between price expectations of international investors and the vendors continue to cause a problem, unless they decide to enter the market as JV partners for development projects. Although transparency for Turkey increased, still a majority of the deals for hotel sales, especially for small hotels and resorts, are done behind closed doors; therefore there is not enough data to calculate the yields. The sales that are speculated during Q are: Hotel Location Buyer Grade # of Rooms The table below shows some of the expected openings in İstanbul for 2011: Royal Garden Park Marmaris Local Keban Otel Taksim Local 4 84 Kartanesi Otel Bursa Local Hotels İstanbul Name of the Hotel Grade # of Rooms DoubleTree Sonkar Garden Inn Sutluce Le Meridien Etiler Orjin Pera Garden Inn Bostancı Crowne Plaza Total 1,279 Hotels

13 Pulse Turkey Real Estate Overview - Q Conclusion The upcoming general elections, scheduled for June 12, is the most significant political event; but as the ruling AKP is strongly expected to come out as the landslide winner, it has not caused any major uncertainty, and hence no delays in in key decisions and projects. Turkey s 2010 GDP growth at 8.9% outpaced even the most aggressive estimates and placed Turkey amongst the top three countries amongst the G20 countries in terms of economic growth projections point to strong growth to continue, but at a slower pace. On the back of strong growth and consumer/business confidence, occupier demand has picked up in This led to strong signs for rental growth in retail and office markets. Due to strong increase in the number of tourist arrivals, the upward trend in the RevPar of the hotels in İstanbul continued during Q The visitor numbers are expected to remain strong during the rest of the year. The global investor interest for Turkey has remarkably increased. There are strong signals for a few transactions to be completed during the remainder of the year. Very aggressive yield revisions by local vendors on the back of strong investor demand will be the major risk.

14 Jones Lang LaSalle Turkey İstanbul Yeşim Sok. No:2 Akatlar - İstanbul Tel: +90 (212) Fax: +90 (212) Avi Alkaş, MRICS, SCSM, SCMD, CLS Alan Robertson, FRICS Country Chairman Managing Director +90 (212) (212) avi.alkas@eu.jll.com alan.robertson@eu.jll.com Nilgün Dil-Erman Dr. Kıvanç Erman, MRICS Regional Director, Retail Director, Capital Markets & Advisory +90 (212) (212) nilgun.dil-erman@eu.jll.com kivanc.erman@eu.jll.com İdil Hamzadi Tuğra Gönden Associate Director,Capital Markets & Advisory Associate Director, Commercial Markets +90 (212) (212) idil.hamzadi@eu.jll.com tugra.gonden@eu.jll.com Jones Lang LaSalle Hotels Elif Egeli Nişancı Defne Gezen Senior Vice President Associate +44 (0) (212) elif.egeli-nisanci@eu.jll.com defne.gezen@eu.jll.com Turkey Real Estate Overview - Q Volume Issue Optional Pulse reports from Jones Lang LaSalle are frequent updates on real estate market dynamics. COPYRIGHT JONES LANG LASALLE IP, INC All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them. Printing information: paper, inks, printing process, recycle directive.