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The Istanbul Office Market 2023 Over Report, shedding light on the office market and supply-demand balance in Istanbul, has been published. According to the report, the vacancy rate in Class A office buildings in the Central Business District areas is 13.2%, with an average rent of  $24.7 in Class A office buildings. It was noted that the increased demand for offices was observed due to the rising search for secure buildings after the earthquake. 

TURKEY - The Istanbul Office Market 4th Quarter Overview Report has been published, which highlights the impacts of economic fluctuations, exchange rates, earthquake risks, global inflation, and changes in working habits on the Istanbul office market. In the latest edition of the report, prepared regularly for 19 years by Propin, one of Turkey's leading real estate companies, it was observed that the demand for secure offices has pushed office vacancy rates to their lowest point.

Sharing her evaluations regarding the report, Ebru Ersöz, Co-Founder of Propin, stated, "The 2023 report once again demonstrates that transformations in the office market are not solely dependent on economic conditions but can also be influenced by natural disasters. Following the earthquakes on February 6th, security concerns and demands for earthquake-resistant offices have played a significant role in shaping the market."

The average square meter rent of Class A offices reached $25

According to the summary data of Istanbul Office Market for the fourth quarter of 2023, the vacancy rate in Class A office buildings in the regions defined as the Central Business District (CBD) was 13.2%, and the vacancy rate in Class B office buildings was 9.2%. The average rent in the CBD was measured as 24.7 dollars per square meter per month, with an increase of 19% throughout the year, in Class A office buildings, while it was determined as 10.1 dollars per square meter per month in Class B offices. In the non-CBD region, the Class A office vacancy rate on the European Side was 10.5% and the average rent was 12.3 dollars, while on the Anatolian Side it was 10.6% and 18.1 dollars, respectively. On the other hand, the highest rent in the fourth quarter of the year was requested in Levent, with 45 dollars per square meter per month.

Stating that despite the negative effects of the inflationary environment and increasing rental costs, the high office demand attracted attention, Ebru Ersöz said, “Despite all the conditions, there was a visible increase in the demand of businesses for office spaces that are modern, safe and committed to business continuity. We see that 2023 office vacancy rates decreased mainly in the last two quarters of the year. The vacancy rate in CBD Class A office buildings dropped to the lowest level in the last 10 years at 15.4% in the year's second half. In the non-CBD region, the vacancy rate on the Anatolian Side has decreased by half in the last 5 years. During this period, when costs in the CBD reached new peaks, new office stocks in developing office districts also met user needs. "For example, Kağıthane confirmed its place among the emerging business areas by hosting three of the 5 largest rental or corporate acquisition transactions in 2023," he said.

New stock is not added, rents increase 

Propin Founding Partner Aydan Bozkurt stated that factors such as economic conditions, difficulty in accessing finance, exchange rates and the increase in construction costs hinder the supply of new offices and said, “We can clearly see that investors are turning to housing and derivative real estate projects where they can apply the build-sell model. Office stock in Istanbul experienced a partial increase last year, with growth originating from Batı Ataşehir, indicating an increase of approximately 435 thousand square meters. Despite the increasing demand, the supply of new offices remains limited, causing rent figures to rise in 2023. Additionally, more office buildings announced their list prices in dollars in 2023. Despite all the difficult conditions, the leasing and corporate purchase of approximately 279 thousand square meters of office space in Istanbul was completed in 2023. "The share of CBD in this volume, mostly experienced in small and medium-sized office areas, was 83 thousand square meters," he said.

Noting that the largest office rental transaction completed in the market was 22 thousand square meters in size, Aydan Bozkurt said, “It was a remarkable result that one in every four closed transactions was outside the CBD and on the Anatolian Side. "The corporate purchase made in an office area of approximately 11 thousand square meters in Ümraniye 19, where we provide the only authorized brokerage service as Propin, was the largest volume transaction in the region," he said.

Istanbul office market will reach 7.4 million square meters!

Referring to the stock outlook prepared with data on new office projects, Aydan Bozkurt concluded his evaluations with the following statements: “As we leave behind a year in which the supply of new offices shrank, we predict that the Istanbul Office Market will reach a size of 7.4 million square meters by the end of 2027, based on current projects. In this period, the tendency of property and project owners to meet the expectations of the business world, to be sensitive to environmental factors and to offer modern office spaces will be the determining factors of market competition. This dynamic environment will encourage industry stakeholders to evaluate social and environmental changes. "As Propin, we will continue to observe the effects of local elections and current conditions in the market in the new year, to meet our customers with office spaces that meet their expectations, and to summarize the general course of the sector with our annual reports."