Vacancy rate in Istanbul office market falls significantly

ISTANBUL

The vacancy rate in Grade A offices in Istanbul, Türkiye’s financial and commercial center, has declined markedly in the first quarter of 2024 compared with the same period of last year, according to a report by Cushman & Wakefield TR International.

In the January-March period of 2022, the vacancy rate stood at as high as 20 percent.

But it declined to 14.65 percent in the first quarter of last year and further down to 10.89 percent in the first three months of 2024, showed the report.

As was the case in other countries, the pandemic changed the way people work in Türkiye: Many companies sent office workers home. This caused concern that as companies adopted the work-from-home or hybrid work schemes offices would remain empty. Office rents declined as demand waned.

However, the vacancy rates have declined both because of employees returning to offices and office supply has not increased significantly.

With the opening of some portions of the İstanbul Finance Center in the third quarter of 2023, the overall supply in the Istanbul office market increased to 7.14 million square meters, said Meriç Diren from Cushman & Wakefield TR International.

Office leasing transactions almost doubled to 56,446 square meters in the first quarter, rising from 29,106 square meters in the same period of 2023.

The office vacancy rates still vary depending on the location, according to Diren.

In the Levent district, for instance, the vacancy rate dropped to 6.23 percent from 15.66 percent in the first quarter of 2022, while it declined from 8.56 percent to 2.4 percent in Gayrettepe-Zincirlikuyu, said Diren.

In Maslak, another busy business district in Istanbul, the vacancy rate retreated from 25.54 percent to 14.6 percent.

[HH] Rent prices on the rise

As demand increased for offices, rents, which declined in 2022, showed a steep increase in 2023, said Diren.

In the first quarter of 2022, office rent prices in many districts dropped on an annual basis, according to Diren.

“But all this changed in 2023. In the first quarter of last year, rents spiked 108 percent in Gayrettepe, increased 61 percent in Levent and rose 47 percent in Maslak,” he said.

This trend continued in the first quarter of 2024, with rents rising 18 percent in Maslak, surging 12 percent in Gayrettepe, according to Diren.

The average rent prices were $38/square meter in Levent in the first quarter, up from $23 in the same period of 2022, while prices climbed from $12 to $28 in Gayrettepe.

In the face of the rising demand, the increase in office rents is expected to continue because real estate companies are keeping away from office investments which limit supply, said Diren.