İstanbul Office Market General Overview

2012 QUARTER 1

İstanbul Office Market General Overview Dear Clients and Friends, In this report, we have analyzed the status of the Istanbul Office Market in The First Quarter of 2012 covering January, February, March 2012. We would like to thank you for your feedback and recognition of our previous reports. We hope that the data in our report would be beneficial for you… The Propin Team

SUMMARY AND FORECASTS

A process in which renovations and changes in Istanbul Office Market will take place started. In order to clearly assess change, we have prepared an assessment related to Planned Growth in Class A Office stock in this report of us. There are approximately 2,6 million m² A class office stock in Istanbul. Stock will expand to 4 million m² minimum with class A office projects stock to be added to supply in 2012 – 2014. 41% of this stock will be in CBD (Central business District). This case will bring fierce competition along in Büyükdere Axis.

We can sum up figures in office market during 2012 First Quarter Period;

• General vacancy rate in class A office buildings in CBD maintained its level in the previous quarter and has been observed as 11,1%.

• Rent average of office buildings in CBD has occurred as 30,2 US$ /m² / month in class A buildings, 15,6 US$ /m² / month in class B buildings.

• In general vacancy rate of class A buildings the most remarkable change compared to the previous period has been observed in Out of CBD - Asia with 3,5% decline.

• General rent average of office buildings has declined in Out of CBD-Europe and Out of CBD - Asia class A office buildings. It remained in same levels in class B office buildings.

2012 First Quarter Period has mostly maintained the pace in rent and purchase procedures postponed from 2011 brought. Since the beginning of 2012, seeking of firms in need of 20.000 m² and over office areas has come to the fore. Firms in search of large area show interest in alternative regions since office rent figures in CBD strain the budgets of large meter square office users. In addition to newly developing Kartal, Ataşehir and Kağıthane office regions, Küçükyalı – Maltepe Region which is on Asia Side metro line have started to take attention.

Approaching deadline dates of qualified projects in Kağıthane Region increase the demand for region. Kağıthane Region has become one of the preferred regions of users who want to be close to CBD. Projects which can offer large areas up to 5,000 m² in single floor like Papirus Plaza have become remarkable for user in need of large areas.

As a plus of Kadıköy - Kartal Metro Line, office regions remaining on the line have started to gain value. As Propin we pre- dict that soon it will be a region in demand with developing transportation lines and starting of urban transformation projects of Küçükyalı - Maltepe Region. www.propin.com.tr 2 İSTANBUL CENTRAL BUSINESS DISTRICT & TERMS

In analyzing office districts using international standards, a TERMS key categorization is between “Central Business District” and Explanations of some of the terms used in the Propin Istanbul “Out of Central Business District”. The Central Business Dis- Office Market Overview are as follows. trict (CBD) incorporates those areas characterized by rela- Class A Buildings: Buildings that have modern technical and tively the strongest demand for office space and where most mechanical infrastructure and management, fire safety, gen- professional office buildings are located. erators, parking areas and professional building management. There are 12 main districts in Istanbul where office buildings They have the best location and the highest rental value in the city‟s office market. are located. Istanbul‟s CBD starts at Barbaros Boulevard, continues Class B Buildings: Buildings that have average technical through Büyükdere Avenue and finishes at the Maslak district. and mechanical infrastructure and management. This in- This axis, which is defines the boundaries of the city‟s CBD, cludes some Class A buildings that have become outdated and others that were built using obsolete technology. includes the Levent, Etiler, Maslak, Zincirlikuyu-Esentepe- Gayrettepe and Beşiktaş-Balmumcu districts. Vacancy Rate: This is the ratio between total vacant areas and total office areas. Office districts located outside of these areas are defined as Out of Central Business District (Out of CBD). Due to Istan- Average Rent Rate: This is the weighted average price of the bul‟s geographical structure, Out of CBD is divided into two vacant areas. The weighted coefficient of rental prices are areas: the European and the Asian sides. calculated in line with the total office areas and vacancy rates, using asking prices. Out of CBD-Europe includes the Taksim-Nişantaşı, Şişli-Fulya -Otim and Airport districts. Asking Price: This is the rental price quoted on the leasing area and can change according to specific agreements. Out of CBD-Asia includes the Kozyatağı, Altunizade, Kavacık and Ümraniye districts. Closing Price: This is the final price that is decided after agreements between landlord and tenant.

www.propin.com.tr 3 VACANCY RATES IN ISTANBUL OFFICE MARKET

VACANCY RATES 2012 The First Quarter

100% Rental Office Floors / ETILER 1 80% 60%

40% 27,7 16,4 13,7 20% 11,1 6,4 10,2

CBD Out of CBD - Europe Out of CBD - Asia

Figure 1 | Source:Propin Class A Class B Istanbul Office Market 2012 first quarter period general va-

cancy average rates are in the graphic above.

General vacancy rate of class A office buildings in CBD as

11,1%, general vacancy rate of class B office buildings in CBD as 6,4% has been observed. Office floors offering General vacancy rate of class A office buildings as 10,2%, detached rent opportunity general vacancy rate of class B office buildings as 27,7% in Le Meridien Etiler... has been determined in Out of CBD - Europe. General vacancy rate of class A office buildings as 10,2%, general va- No agency service charge. cancy rate of class B office buildings as 13,7% has been Please click on www.propin.com.tr for other properties we represent and for detailed information. observed in Out of CBD - Asia.

VACANCY RATES BY DISTRICTS 2012 The First Quarter ¹

100% 80% 60% 39,5 31,0 40% 23,6 26,6 29,8 17,4 16,0 20% 12,58,7 7,2 13,0 10,7 12,1 13,9 11,8 11,0 14,6 3,6 4,4 3,7 2,0 5,3 4,1 4,3 0% Levent Etiler Maslak Zincirlikuyu Beşiktaş Taksim Şişli Fulya Airport Kozyatağı Altunizade Kavacık Umraniye Esentepe Balmumcu Nişantaşı Otim Gayrettepe Figure 2 | Source: Propin Class A Class B Average vacancy rates in twelve office regions of Istanbul rainye as 100% full. These developments caused to obser- are in Graphic 2. vation of vacancy rates of class B office buildings in Um- raniye in 29,8% rate. Increasing vacancy rates with buildings newly added to the supply in Kavacık Region are balanced via impacts of rents Office block in Le Meridien Otel exclusively represented by occurred. Rent with 4.535 m² in Smart Plaza which is rep- Propin has been added into supply in Etiler Region. This resented by Propin of Swedish security firm Securitas increase in stock caused vacancy rate in the region to in- which is also exclusively represented by Propin has be- crease to 12,5% level. come one of the spectacular bargain in Kavacık. Swedish security firm Securitas which is ex- By giving up the sales of office building with 9.266 m² be- clusively represented by Propin has rented longing to Ünlü Tesktil represented by Propin in Umraniye 4.535 m² office area in Smart Plaza which is Region, it was concluded to be rent. Building rented by alsorepresented by Propin. Eximbank has been added to class B office supply in Um-

¹ Once Tat Towers are fully out of the stock, vacancy rate of Class A in Zincirlikuyu - Esentepe - Gayrettepe will drop back to 1,7%. www.propin.com.tr 4 HISTORICAL VACANCY RATES IN ISTANBUL OFFICE MARKET HISTORICAL VACANCY RATES BY CLASS A BUILDINGS Rental Office Building / ETILER 3 2012 The Last Four Quarters

25% 20% 16,9 17,2 16,9 16,4 15% 16,2 12,4 11,1 11,1 10% 10,7 10,3 10,2 5% 9,8 0% '11-2ndQ '11-3ndQ '11-4thQ '12-1stQ CBD (BUYUKDERE AVE) Out of CBD-ASIA Out of CBD-EUROPE

Figure 3 | Source:Propin

The figure indicating the change in the vacancy rates of Detached office building Class A office buildings during the first quarter period is given above. Etiler Villa

Increase in vacancy rates of class A buildings in CBD ob- for rent on Nispetiye Avenue. served during 2011 has left its place to stationary line in No agency service charge. 2012 first quarter. No change has occurred in vacancy Please click on www.propin.com.tr for other properties we represent and for detailed information. rates in CBD since 2011 last quarter until now.

Although there are buildings newly added to stock in Out of HISTORICAL VACANCY RATES BY CLASS B BUILDINGS CBD – Europe during last four quarters, decline of vacancy 2012 The Last Four Quarters rate has grabbed attention. Limited supply in CBD causes firms which want to be in Europe Side to pay attention al- 50% ternative areas in Out of CBD – Europe. 40% 30,4 29,9 28,3 27,5 Despite of sudden increase in Out of CBD – Asia office 30% 17,5 stock, rents in the region caused vacancy rates to sudden 20% 15,5 17,2 13,7 10% 7,2 6,6 6,6 6,4 decline. Another factor leading to decline in stock and va- 0% cancy rates is that some office buildings in Out of CBD – '11-2ndQ '11-3ndQ '11-4thQ '12-1thQ Asia changed their functions during 2012 first quarter. CBD (BUYUKDERE AVE) Out of CBD-ASIA Out of CBD-EUROPE

For Sale or Rental Office Building/ KAVACIK 2 Figure 4 | Source:Propin

The figure indicating the change in the vacancy rates of Class B office buildings during the last four quarters is given above.

During 2012 first quarter, vacancy rate of class B buildings in CBD and Out of CBD - Europe has followed a stable progress as it happened in class A buildings.

A decline of 3,5% rate in vacancy rate of class B office buildings in Out of CBD – Asia has been observed com- Life begins in Breeam Green Building pared to the previous quarter. Change of on sale - rent Certificated & Inhabited status of buildings in stock and rents occurred had influ- ence on this situation. For example; rent of a class B Smart Plaza. office building with 6,000m² usable space in Out of CBD No agency service charge. Please click on www.propin.com.tr – Asia Kozyatağı Region was given up. for other properties we represent and for detailed information. www.propin.com.tr 5 AVERAGE RENT RATES IN ISTANBUL OFFICE MARKET

GENERAL AVERAGE RENT RATES 2012 The First Quarter

50 $ Rental Office Floors / MECIDIYEKOY 4 40 $ 30,2

30 $ /month

2 17,7 19,3 20 $ 15,6

$/m 10,5 12,5 10 $

0 $ CBD Out of CBD - Europe Out of CBD - Asia

Figure 5 | Source:Propin Class A Class B The general rent averages of the Istanbul Office Market 2012 are given in the above figure.

Rent average of class A buildings in CBD has been 30,2 US$ /m² /month, Rent average of class B buildings has Early delivery in the newest been CBD is 15,6 US$ /m² /month. Class A office project of Mecidiyeköy... While rent average of class A buildings in Out of CBD - Renaissance Mecidiyekoy Europe has been observed as 17,7 US$ /m² /month, rent average of class B buildings in Out of CBD - Europe has No agency service charge. Please click on www.propin.com.tr been identified as 10,5 US$ /m² /month. for other properties we represent and for detailed information.

AVERAGE RENT RATES BY DISRICTS 2012 The First Quarter ²

50 $ 37,7 40 $ 34,2 35,0 29,2 30 $ 26,3 24,6 21,4 23,2 21,8 /month 19,6 2 20 19,0 18,5 18,4 20 $ 16,1 15,3 13,9 13,4 14,5 $/m 12,5 12,2 11,2 9,5 10 $ 6,4

0 $ Levent Etiler Maslak Zincirlikuyu Beşiktaş Taksim Şişli Fulya Airport Kozyatağı Altunizade Kavacık Ümraniye Esentepe Balmumcu Nişantaşı Otim Gayrettepe Figure 6 I Source:Propin Class A Class B

The rent averages during the first quarter of 2012 according thanks to accessibility and access to alternative public to the regions is given in Figure 6. transport vehicles. Rent average of class A buildings in Zincirlikuyu - Esentepe During this quarter, the most remarkable change in rent - Gayrettepe Region has increased compared to the previ- average of class A buildings is the decrease in Taksim – ous quarter and rent average in 2012 First Quarter Period Nişantaşı region when it is compared to the previous quar- has been observed as 29,2 US$ /m² /month. ter. Also a decrease in class B office buildings in the region has been observed and average rate has been defined as Rent average of class A office buildings in Altunizade Re- gion has increased and has been observed as 21,8 US$ / 19 US$/m² /month. m² /month. This rate is the highest rate of last four quarters Rent average of class A buildings in Beşiktaş - Balmumcu for Altunizade Region. Region has been observed as 32 - 33 US$/m² /month during last two quarters of 2011. By increasing to 37,7 US$ / Rent average of class A office buildings in m² /month in 2012 first quarter, rent average has reached Altunizade Region is the highest rate of last four the highest value of last three quarters. Region extremely quarters. takes attention of especially office users with small areas ² Regional average rental rates are calculated by landlords on the basis of list prices declared to the market in their evaluations. www.propin.com.tr 7 HISTORICAL AVERAGE RENT RATES IN ISTANBUL OFFICE MARKET

HISTORICAL AVERAGE RENT RATES BY CLASS A Rental Office Floors / ATASEHIR 6 BUILDINGS 2012 The Last Four Quarters

35 $ 29,3 30,2 30 $ 27,6 27,6 25 $ 19,5 19,4 20 $ 18,8 19,3 15 $ 18,3 17,9 18,9 17,7 10 $ 5 $ 0 $ '11-2ndQ '11-3ndQ '11-4thQ '12-1stQ CBD (BUYUKDERE AVE) Out of CBD-ASIA Out of CBD-EUROPE Figure 7 | Source:Propin The change in the rent averages of Class A buildings that were inspected for quarterly periods are given in the above Büyükhanlı Plaza figure. for firms wishes to move Rent average of class A building in CBD has been ob- into Ataşehir before the end of 2012 served in same levels of 2011 overall. Rent average has No agency service charge. started to increase since the last quarter. It has reached Please click on www.propin.com.tr for other properties we represent and for detailed information. 30,2 US$ /m² /month by maintaining its increase in 2012

first quarter. HISTORICAL AVERAGE RENT RATES BY CLASS B Rent average of class A buildings in Out of CBD – Europe BUILDINGS 2012 The Last Four Quarters has decreased to 17,7 US$ /m² /month, the lowest level of 35 $ last four quarters. 30 $ 25 $ 17,0 Rent average of class A office buildings in Out of CBD – 20 $ 14,8 14,9 15,6 15 $ Europe has been observed in same levels during last four 13,5 13,3 12,9 10 $ 12,5 quarters. 10,5 5 $ 9,6 10,4 10,3 For Sale or Rental Office Floors / ZINCIRLIKUYU 5 0 $ '11-2ndQ '11-3ndQ '11-4thQ '12-1stQ CBD (BUYUKDERE AVE) Out of CBD-ASIA Out of CBD-EUROPE

Figure 8 | Source:Propin

The change in the rent averages of Class B buildings

during the last fourth quarter is given in the above figure.

Rent average of class B office buildings in CBD has shown a sudden decline in 2011 second quarter. How- ever, rent average of class B office buildings has been observed in same levels during last three quarters.

Rent averages of class B buildings in Out of CBD – Europe and Out of CBD – Asia have followed in same 9.700 m2 office area nestled levels during last four quarters. This indicates that rent within parks in the city center in averages in class B office buildings in Out of CBD re- Istanbloom gions which have been monitored at the same levels for No agency service charge. Please click on www.propin.com.tr a long time are fixed in a specific level. for other properties we represent and for detailed information.

www.propin.com.tr 8 PRIME RENT RATES IN ISTANBUL OFFICE MARKET

3 PRIME RENTS BY DISTRICTS IN ISTANBUL OFFICE MARKET 2012 The First Quarter - 2012 The Fourth Quarter

70 $

60 $

50 $ 55 50 50 46 46 45 45 40 $ 43 45 42 40 42 38 38 38 3840 40 35 38 35 35 35 30 $ 3535 35 35 35 33 35 3131 32 / month / 28 2 25 26 25 25 20 $ 24 22 22 2222 /m 21

$ $ 19 10 $ 15 15 15

0 $ Levent Etiler Maslak Zincirlikuyu Beşiktaş-Balmumcu Taksim-Nişantaşı Şişli-Fulya-Otim Havaalanı Kozyatağı Altunizade Kavacık Ümraniye Esentepe Figure 9| Source:Propin Gayrettepe '11-2ndQ '11-3rdQ '11-4thQ 12-1stQ

The comparison of the highest rent list amounts demanded per region according to the last fourth quarter is given in Figure 9.

Zincirlikuyu - Esentepe - Gayrettepe Region has been the region which the highest rent is demanded with rent figure of 50 US$ /m² /month during 2012 first quarter.

Levent Region is the second region which the highest rent cost is demanded with rent figure of 42 US$ /m² /month.

Office areas have been rent in Taksim – Nişantaşı Region which the highest rent figure was demanded in last quarter period. Thus, the highest rent demanded in region has decreased from 50 US$ /m² /month to 38 US$ /m² /month.

The highest rent cost demanded in Umraniye Region which has fixed rent figures is 22 US$ /m² /month.

3 The rent numbers given in the graphic are the prices declared by the property owners to the market. The general rent averages in districts are shown in page 6.

Rental Office Floors / MASLAK 7 Rental Office Building / KAVACIK 8

For those who look for an office building Construction is completed in easily accessible and ready to use Forum Plaza offering floor by floor rent Maslak Center or purchase opportunity

No agency service charge. No agency service charge. Please click on www.propin.com.tr Please click on www.propin.com.tr for other properties we represent and for detailed information. for other properties we represent and for detailed information.

www.propin.com.tr 10 ISTANBUL OFFICE DISTRICTS CLASS A STOCK COMPARISON

COMPARISON OF CLASS A OFFICE STOCKS

Class A Total Stock( m2) *Light colors show the vacancy 500.000

*%12,1 *%7,2 Percent of Suply 400.000 *%14,6 *%3,6 1 2 *%31,0 *%26,6 300.000 *%16,0 4 3

200.000 *%5,3 25% 16,9 17,2 *%4,3 16,9 16,4 20% *%12,5 *%2,0 *%10,716,2 100.000 15% 12,4 11,1 11,1 10,3 10%9,8 10,7 10,2

0 5% Levent Etiler Maslak Zincirlikuyu Beşiktaş Taksim0% Şişli Airport Kozyatağı Altunizade Kavacık Ümraniye Esentepe Balmumcu Nişantaşı Fulya Gayretttepe Otim'11-2ndQ '11-3ndQ '11-4thQ '12-1stQ CBD (BUYUKDERE AVE) Out of CBD-EUROPE Out of CBD-ASIA Figure 10 | Source:Propin The stock graph of the office buildings in the Istanbul Office Out of CBD-Europe [Taksim-Nişantaşı, Şişli, Fulya, Otim, Market (located in Istanbul‟s twelve districts) for the third Airport]; is equal to 24% of the total stock. quarter of 2012 is given above. The districts with larger than Users who use their own buildings in Airport Region chang- 300.000 m2 of stock are numbered on the graph in accor- ing locations have increased stock rate in region. However, dance with their sizes. occurred rents did not change the vacancy rate.

CBD [Levent, Etiler, Maslak, Zincirlikuyu - Esentepe - Gayret- Out of CBD-Asia [Kozyatağı, Altunizade, Kavacık, Üm- tepe, Beşiktaş - Balmumcu], is equal to 41% of the total raniye] is equal to 35% of the total stock. stock. Stock has increased since new buildings have been added Total stock in CBD has increased as approximately 10% to Out of CBD – Asia stock and status of on sale buildings compared to 2011 Fourth Quarter Period. Buildings added to has been changed as rental during 2012 first quarter. Oc- supply in Etiler and Zincirlikuyu-Esentepe-Gayrettepe Region curred rents and buildings removed from office feature have increased limited stock in CBD. have kept the balance.

Rental Office Building / NISANTASI 9 Rental Office Floors / ANKARA 10

Gathering the attention with its To solve your office needs from 325 m² infrastructure equipment in Nişantaşı, to 3,500 m² on a single floor in Rumeli Plaza Ankara Kentpark Offices

www.propin.com.tr 11 ISTANBUL OFFICE DISTRICTS CLASS A STOCK COMPARISON

STOCK INCREASE IN CLASS A BUILDINGS ACCORDING For Sale or Rental Office Floors / KAGITHANE 12 TO YEARS between 2012 - 2014

4.500.000

4.000.000 4000000

3.500.000 3350000

3.000.000 2950000

2.500.000 2600000

2.000.000 2011 2012 2013 2014

Figure 11 | Source:Propin StokStock Büyüklüğü m² … Investment opportunity in Kağıthane, Papirus Plaza! As of the end of 2011, there are approximately total 2,6 With the guarantee of the Mesa / Ferko. 2 millions m class A offices in twelve office regions of Istan- Office areas between 159 m² - 4819 m² bul. No agency service charge. Please click on www.propin.com.tr “Stock Increase Per Years Graph” prepared by Propin is for other properties we represent and for detailed information.

above. In this study, an assessment is made within the PLANNED GROWTH IN CLASS A OFFICE STOCK scope of projects which are launched to be added to sup- 2014 forecast Gelişecek Ofis Stokunun Bölgelere Göre Dağılımı - 2 ply in 2012-2014. It is expected that 1,4 million m office 2013 areas will be added to stock and class A office stock in 21% Istanbul will reach minimum of 4 million m2 until the end of 6% 2014. 12% 61% In addition to this growth, projects with various scales which have not been launched yet will expand class A office stock of Istanbul to above 4 million m2.

Kartal - Ataşehir - Kağıthane Rental Office Building / KAVACIK 11 Figure 12 | Source:Propin

Proportional distribution of areas to be added to office stock takes place in Graph 12.

There are twelve office regions in Istanbul now. Taking into consideration the circumstances that we face in, it is seen that 24% share of the next stock focuses on Kartal, Ataşe- hir and Kağıthane. These three regions will take place in new office regions during near future.

Detached office building in the Another interesting point in Graphic 12 shows that next most valuable location of stock focuses on CBD continuing along Büyükdere Axis. Kavacık, Permak Plaza 41% of the stock decided to be added to the market will take place in CBD. This situation indicates that competition No agency service charge. Please click on www.propin.com.tr for other properties we represent and for detailed information. will highly increase in especially Büyükdere Axis. www.propin.com.tr 11 “ We do our work diligently ”

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