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The 56th issue of the “Istanbul Office Market Overview” report, which has been prepared quarterly for 15 years by Propin Real Estate and Consulting Service, was published on February 2, 2021.

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ISTANBUL (TR) - The 56th issue of the “Istanbul Office Market Overview” report, which has been prepared quarterly for 15 years by Propin Real Estate and Consulting Service, was published on February 2, 2021. The report revealed striking results for the whole year, with the fourth quarter of 2020. According to the report, the issue of how office use will change in the post-pandemic period has become one of the main agenda items of the office market, while many office users switch to home-office and rotational working model due to the COVID-19 pandemic. The uncertainty arising from the fluctuations experienced by the economic impact of the pandemic all over the world froze office leasing and purchasing transactions in the first half of 2020. This freezing state due to uncertainty; While the transaction volume closed in the Istanbul Office Market decreased by 30% compared to the previous year, it pushed the users to search for different solutions. In their search for solutions, including the most traditional office users, they do not bind themselves with long-term contracts and do not bear the entire initial investment cost of office decoration; they turned to take a closer look at new workspaces offering “flexible rental services”. Due to the new buildings added to the office stock, a 2% growth has been observed in the last year. By the end of 2020, the Istanbul office stock reached 6 million 500 thousand square meters.

Corporate companies' interest in shared offices increased by 40%

According to the “Istanbul Office Market Overview 2020 4th Quarter” report, shared offices, which have grown by 22% each year for the last 10 years, experienced a leap forward during the pandemic period. While the shared office demand of large and corporate companies worldwide increased by 40%, there was a 25% increase in start-ups and a 15% increase in freelancers. In this context, the number of shared office areas around the world, which is 20 thousand, is expected to increase to 30 thousand in 2022. In the published report, it is also noted that services such as serviced offices, virtual offices, and shared offices, which provide flexible leasing, have grown in different regions of Istanbul in recent years. Stating that these services are among the main developments followed by the market, PROPIN Founding Partner Aydan Bozkurt said, “Flexible leasing solutions are at the top of the list of alternative solutions for users trying to adapt to new working conditions arising from the pandemic. Many office users tended to shrink their headquarters offices and divert their teams that could not work comfortably from home to satellite offices that allow flexible use. In response to this rapid demand, companies providing flexible leasing services throughout 2020 increased their number of centers by leasing new office spaces. As the demand intensifies in this direction, we expect an increase in the number of branches of flexible leasing service providers in 2021, which we have never seen before. On the office user side, this new trend of demand towards flexible leasing solutions should be evaluated as a brand new and positive solution for long-standing office spaces, and this development should be discussed by the property owners of real estate where traditional rental is not feasible.”

The increase in vacancy rates will continue

According to the report, the vacancy rate for Class A office buildings in the Central Business District (CBD), which has the highest office stock in Istanbul, was 30.8% in 2020. Thus, the vacancy rate for Class A office buildings in the CBD has increased more than 3 times in the last 10 years. While the vacancy rate for Class B office buildings reached the highest value of the last 10 years with 20.2% in the first half of the year, it closed the year 2020 with 17.3%. This rate is 22.2% in Class A office buildings in Out of CBD-Europe; It was 25.2% in Class B office buildings. Looking at Out of CBD-Asia, it was seen that the vacancy rate was 21.7% for Class A office buildings and 16.7% for Class B office buildings. Aydan Bozkurt said, “We expect the future of the Istanbul Office Market to be shaped by the decision of the international companies' working model globally. Clarification of new working models that will occur after the pandemic will determine the direction of the market. We anticipate that office vacancy rates will continue to rise and the market will maintain its shrinkage during this transition period.”

30% reduction in transaction volume

In the report, it was noted that mainly medium and small volume transactions were realized in 2020. It was observed that leasing transactions were more than purchasing transactions on the basis of number and volume. In this context, while leasing and corporate purchasing transactions were closed in 185 thousand square meters of office space throughout 2020, the closed volume decreased by 30% compared to the previous year. While no transactions were recorded in office areas of 15 thousand square meters and above in the Istanbul Office Market, the ratio of transactions between 10 thousand and 15 thousand square meters to total volume was recorded as 8%. 16% of the closed transactions were seen in office areas ranging in size from 5 thousand to 10 thousand square meters. In 52% of the total transaction volume, the size of office areas varied between one thousand and 5 thousand square meters. Transactions closed in offices under one thousand square meters accounted for 24% of the total volume. The demand for CBD continued in 2020 as well. The transactions carried out in approximately 68 thousand square meters of office space in this region accounted for 37% of the total volume in Istanbul.

Class A office stock is expected to increase by 20% within 4 years

According to the report, the office stock in the Istanbul Office Market increased in parallel with the office supply that slowed down due to the pandemic. The office stock increased by 200 thousand square meters by the end of 2020 and reached the level of 6 million 500 thousand square meters. Accordingly, while a growth of 2% was recorded compared to the previous year, it was noteworthy that the stock, which was 2.2 million square meters in 2008, increased by approximately 3 times at the end of 2020. Reminding that new projects have been developed at different scales in the north of the city with the effect of the Istanbul Airport opened in 2019, PROPIN Founding Partner Ebru Ersöz said, “Including these projects, within the scope of projects in individual locations in Istanbul, approximately 1 million square meters of office space is planned to be put into service in 2025. At this point, we anticipate that the Class A office stock in the Istanbul Office Market will increase by 20% by the end of 2024, to approximately 7.8 million square meters.”