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Turkish Urban Regeneration Creates Foreign Investment Opportunities

Cushman & Wakefield has released a New report on urban regeneration in Turkey.

The report sheds light on the need, volume, legal framework, challenges and potential solutions for urban regeneration projects. It further highlights that conventional financing models will not suffice to cope with the volume of investment needed and that alternative financing models and foreign investment are a must for a sustainable urban regeneration process.

According to the report the annual need for construction financing is estimated at US$ 23 billion highlighting the fact that such volumes require alternative financing tools and foreign investment to successfully realize urgently required urban regeneration projects.

Haluk Sur, Chairman for Cushman & Wakefield Turkey, emphasized the importance of urban regeneration and indicated that 6.7 million residential units will have to be demolished and rebuilt within the next 20 years and as such 334,000 units will be subject to transformation on an annual basis.  He further added: “To complete the entire process US$ 465 billion of financing is needed which equates to US$ 23 billion annually.”

Incentives will have an accelerating effect on urban regeneration

According to Togrul Gonden, Managing Partner for Cushman & Wakefield Turkey, the existing legal framework is a positive step but incentive mechanisms should be activated to accelerate a full-scale urban regeneration plan. Stating that "incentives may both encourage property owners to renew their buildings and attract developers and investors," Gonden underlined that the process offered opportunities not only for local but also for international investors and developers. 

Gonden also stated that if all the buildings to be renewed until 2023 were constructed as per green building standards, approximately US$ 25 billion of energy savings could be achieved. "Traditional models such as unit sharing, build-and-sell and pre-sale will be insufficient for such a sizeable undertaking as urban regeneration.”

Tugra Gonden, Managing Partner for Cushman & Wakefield Turkey, emphasizes that it is difficult to finance the urban regeneration plan with traditional models such as unit sharing, build-and-sell and pre-sale due the volume anticipated and points to alternative financial resources. Gonden said that "diversification of financial tools is required to finance the regeneration. In this regard, new regulations presented to the market by the Capital Markets Board, such as real estate certificates, sukuk certificates, real estate investment funds and Turkish private pension funds can constitute alternatives and play a significant role."

Middle Eastern investors eye urban regeneration with interest

Gonden continued: “For a successful completion of urban regeneration, it is vital to cooperate with foreign investors. Especially for investors with a higher appetite for risk, the urban regeneration in Turkey may offer important opportunities. Last month, we met approximately 20 different investors in three different Middle Eastern countries (Bahrain, Qatar and United Arab Emirates) and five different cities (Manama, Doha, Abu Dhabi, Dubai and Sharjah). We presented investors with various investment opportunities from a wide range of sectors such as rent-producing offices and shopping centres, mixed-use projects, development opportunities, hotels and student housing.

“Even though investment priorities of the companies we met were offices, retail and industrial assets in general, urban regeneration projects caught serious attention and interest as residential investments.”

Gaziosmanpa┼ča represents 36%of the total regeneration area

The Urban Regeneration report points out that Gaziosmanpasa is the largest regeneration area in Istanbul with 392 ha of land, followed by Pendik and Kadikoy districts with 146 ha and 134 ha, respectively.