What Should You Consider Before Buying A Commercial Property In Turkey?
29 April 2020
Investing in commercial properties is the higher and professional level of investment in the real estate sector; it is more profitable, more stable, and shorter in ROI time.
Choosing the right property may indicate from the beginning the result of your investment either successful or not.
In the following paragraphs, we will discuss the main points that would help you in choosing the right commercial property in Istanbul.
Is Your Commercial Property Close to Public Transportation?
While searching for the suitable property, this is one of the main things to make sure of ticking it in your checklist.
Millions of Istanbul’s inhabitants are using Istanbul Metro network for their transporting every day. The network that has been expanding rapidly in the last few years is still trying to catch up with the fast expansion of the city. The total length of Istanbul metro railway lines was about 145 km in 2015, and was planned to reach a total of 441km in 2019. Although it didn’t reach the exact number but working is still on to reach this target and the next target which is reaching a total length of 981 km in 2025.
Having a property next to, or close to Metro station guaranty a higher demand for your property and gives you the advantage to control the deal and get a higher price.
Is Your Commercial Property in the City Center?
When talking about “city center” there is a kind of confusion in using the term. Some people consider the “city center” of Istanbul as “Taksim Square” and the areas around it, this is partially true but not a hundred percent true. This perception is based on geographical measurements to identify the central. Although, the city center of the historical Istanbul includes the districts of Fatih, Sisli, Beyoglu, Besiktas, Uskudar and Kadikoy, But that was a hundred years ago and Istanbul city is now much bigger and has districts that are as active as these districts.
Some other people use the term “city center” to refer to the active and energetic part of the city where you can find the banks and restaurants, hospitals and cafes, government centers and markets. This use is wider and more close to reality, and it’s fair when applied on Istanbul because Istanbul of today is much bigger than the districts that we mentioned before; we can find that districts like Zeytinburunu, Bakirkoy, Bacilar, Kagithane, Maslak, Levent, Goztepe, and Atasehir which form the middle circle of the city, all these districts are part of the “city center”.
Even when we go to the outer circle of the city, we can find that districts like Kucukcekmece, Avcilar, Beylikduzu, Esenyurt, Bahcesehir, Basaksehir, Cekmekoy, Sancaktepe, Kartal or Pendik, are all city centers in terms of services and facilities available there, and in the size of available buildings and developments, and in the number of population living in those districts.
Looking at Istanbul from this perspective is more realistic and can give us a better idea of how big and how developed is the city, and how unfair it is to limit Istanbul in a few districts.
Now, when you come to choose your next commercial property make sure to pick up an option in the old city center of Istanbul as it is more demanded and higher in rental income, but it’s higher in cost as well; take in consideration at the same time that a wider range of options is available in the multiple city centers of Istanbul where units are more affordable, various, and might be more profitable as well.
Is Your Commercial Property in a Business or Shopping Center?
In the past, all cities and capitals of the world countries would have famous streets or markets where people head to when they need to make shopping or get some services. Big and historical cities like Istanbul had also some specialized markets that provide higher-level service and better quality products, like jewelry, smith, or carpenter markets.
In our days, business centers and shopping centers are playing the role of gathering the sellers and services providers in one place to concentrate the demand and raise the traffic of clients. Having your property in a business center or a shopping center puts your property in the spotlight of the searchers and guarantees you a higher demand and a higher possible rental income.
The Numbers of shopping centers and business centers available in Istanbul are increasing in line with the continuous expansion of the city and the increase in its population.
Is Your Commercial Property Ready?
Having a commercial property in Istanbul city center, close to a metro station, and in a business or shopping center would be a perfect option for all investors, but this option might not be reachable for most of us because it has many factors that would make its price High.
The best chance to get such a property is to buy it off-plan or while it’s still under construction. This will give you the chance to get a lower price, easier payment plan, and a bigger profit margin when the capital appreciation is added to the calculation after the construction is done.
What type is Your Commercial Property?
Investing in commercial properties is as variable as the types of commercial properties available in Istanbul, with each type having its features and specification. Let’s go through these types.
In a big city like Istanbul with millions of visitors every year, hotel apartments are becoming more preferable by tourists, especially by those frequent ones who are staying for a longer period with repetitive visits. Hotel apartments are providing a lower cost option than hotels and a more spacious and comfortable style of residence. In terms of investment, hotel apartments are considered to be the most profitable investment among commercial properties due to the high rental income they can make per year. Famous intercontinental hotel services providers are managing this sector, guarantying high yearly yields for owners of the properties.
Guaranteed rental incomes might last for 20 years in some contracts, and the rental income percentage would vary between 7%-10%.
Even in our days, when most of the customers, producer and service provider are leaning to depend more on online shopping especially in “Corona Virus” days, the shops will always have their specialty and importance that can’t be replaced. People who were locked down in the days of COVID-19 will for sure enjoy shopping from markets with much more appreciation after the pandemic is gone.
Our modern lifestyle is depending extremely on pre-prepared products, technology, and services. When taking into consideration the huge number of Istanbul’s inhabitants, we can imagine easily how much shops are demanded to provide the needed products and services for those people.
In fact shops among commercial properties are like a winning card that can be used for many purposes and yet achieve good returns. Shops are used as grocery, barber, laundry, and many more purposes which make them highly demanded and easy to rent. Shops are generally let for commercial renting which means mid to long period like 5 years, and at a good rental yield per year between 6% and 8%.
In the big and crowded city of Istanbul this new concept of housing is getting more and more popular and is becoming a trend among the new developments in the city. The (Home-Office) type of property is an apartment that can be used as an office, usually comes with a small open kitchen and a smaller space in general. This type is allowing the owner to use or let the apartment as a residence or as a working place. These types of apartments are usually put in a separated part or building of the project, and sometimes with separated entrance. Of course commercial renting would provide better returns, but both options are available for the owner.
On the other hand, investors can choose to invest in offices in specialized commercial buildings or towers, where flats are bigger and let for rent with only shell and core, giving the option of decoration to the renting company to customize the flat to meet its needs. Again, office renting is usually a long term renting of multiple years 5 or 10, with a yearly return of 7-8%.
Going back to the roots, all of the other properties are based on Lands. Land is the commercial property that everybody needs, although it might be under-estimated a little bit. In terms of Investment, Land could be a profitable investment when chose and bought at the right time. Lands in Istanbul are residential at majority; although there are many options of agricultural lands but options are relatively small for professional agricultural projects. Options of lands are available in Istanbul are more suitable for personal use like building a villa or farmhouse, and suitable for commercial development or project.
Outer districts of Istanbul are the place where more options of lands are available like “Beylikduzu, Bahcesehir, Basaksehir, Cekmekoy, and Pendik”
What is Your Time Target?
It’s important to have a plan or a time target for your investment, this will make it possible for you to calculate the numbers that you have and know how profitable would your investment be.
When considering a short term investment in a commercial property in Istanbul, this might be profitable only when buying an off-plan property in an early stage and sell it when it is ready which might achieve 20-40% percent profit in 2-3 years.
In the long term, with 5 years or 10 years rental contracts, you can expect something between 6-10% yearly return of your commercial property price according to its type shop, office or hotel apartment
These main points would give you an idea of the commercial properties market in Istanbul in general. When searching on the ground, keep these points in mind and don’t forget to consult a local real estate agent for more detailed information.