1: Changing infrastructure, opportunity or threat?
Last April at the 25th the Turkish Prime Minister Yildirim announced that Turkey will keep investing in the Infrastructure. This makes more remoted areas better accessible and it will reduce travel time (Bloomberg). The main reason he gives is that those investments are one of the main drivers of the economy. Yildirim: “This is why Turkey’s economy tripled in size and exports quadrupled” since the ruling AK Party came to power in 2002, he said. “While the world was running from crisis to crisis, Turkey carried out some of the largest projects in the world.”
Rail
In the tree biggest cities: Istanbul, Izmir and Ankara big investments are made to increase the public transport network. Only Istanbul will receive five new metro lines which will be completed by 2019, offering Istanbul’s commuters a total of more than 400 km of railroads (Daily Sabah). Next to this Turkey will increase their high speed train network from 1 (Istanbul – Ankara) with 4 new lines in the coming 5 years to reduce travel time from the Anatolian area to the three big cities. The government has made a commitment to expand the rail network. This is with the construction of 9752 km of high speed track and 5663 km of conventional track by 2035, with an investment of A$42 billion (A$21.9 billion before 2023). (Source: Turkish Railways ’ ‘The Development of Railway Infrastructure in Turkey’ presentation by Nazim Bukulmez, Deputy Head of Research and Planning Coordination Department of Turkish Railways, 03 June 2014)
Airports
Istanbul will build The first phase includes the construction of 3 runways, a terminal including 5 piers with an area of 1.3 million m2 and other site facilities. At the end of the completion of all phases, a visionary project will come to life providing 76 million m2 of airport with 6 runways, supporting 3,500 take-offs and landings per day, 200 million passengers a year, and access to 350 worldwide destinations. Compared with the two existing airports Ataturk(57 million) and Sabiha Gökçen(12 million) will the new airport increase the number of passengers incredibly. The project is one of the largest investments in modern Turkish history and the Turkish economy will generate billions of additional euros per year together with providing so many employment opportunities for thousands of people (BIMireland.ie).
In this thesis I will discuss the opportunities and threats for existing shopping malls. Will the changes in infrastructure reinforce them or will they create more threats?
2: The effects of a changing political situation in turkey on the retail market
On 15 July 2016 a part of the Turkish Armed Forces tried to attempt a coup against the operating institutions. Even though it is not exactly clear who attempted the coup it is clear that this situation changed a lot in turkey and their foreign relations. Another more recent happening is the referendum of last Sunday(16th of April). With a “Yes” result president Erdogan obtains more power.
Since 2004 an increase in incoming FDI was registered. This was caused by the improving monetary policies. Because of the bad monetary policy the Turkish Lira lost his value. In 2004 1 US Dollar was worth 1.87 million Turkish Lira (Wisselkoers-euro, 2016). In 2005 the Turkish Central Bank replaced the Old Turkish Lira swapped into New Turkish Lira. Because of the lower risks and the increasing GDP and population Turkey became a serious investment option for foreign investments.
Nowadays Turkey’s FDI position is decreasing because of the recent terror attacks and the attempted coup. As mentioned in the previous paragraph 2 of the three credit rating agency’s lowered their rating to junk status. At Kearney developed a FDI confidence index; in 2015 Turkey was on the 22th place of this index (AT Kearney, 2015). But the instable situation and the downgrade to junk status will affect the Turkish incoming FDI in the future.
Because of the recent downgrade from “Moody’s” and “Standard & Poor’s” to junk status it will probably lead to a lag of incoming FDI in the future. Vastned recently sold their Turkish properties in the heart of Istanbul with a bookvalue of 77 million euro(Vastgoemarkt.nl). But what will those developments mean for existing investments in retail? What will those political developments mean for mall management in Turkey which opportunities and which threats are created?
3: The success factors of b(l)ooming shopping malls in Turkey
PricewaterhouseCoopers (PwC) released “Glimmering Star – Impact of Retail Sector on Turkish Economy” in September 2010, estimating that the retail sector will grow to 304 malls totaling eight million square meters by the end of 2011. PwC’s estimate translates to approximately 115 square meters of modern retail per 1,000 persons. The current density estimates range from between 200 square meters per 1,000 in the Istanbul market to less than 100 square meters per thousand in other parts of the country, according to Jones Lang LaSalle. It seems clear that Turkey’s rapidly growing and modernizing populations can support substantially more than the current stock of modern retail space.
Economic
At the moment of speaking Turkey has a GDP per capita of $24.308 USD and it is expected to grow with 3,8% the coming year (OECD). Compared with The Netherlands the expected growth rate is 1,9%. This rapid increasing GDP is one of the characteristic features of the Turkish economy for the last 8 years.
Demographic
Turkey has a population of almost 77 million inhabitants and it is expected to grow with 1,1% the coming year (OECD). This rapidly growing population is one of the other important characteristics of Turkey. What may be more important is that turkey has a relative young population. 67% of the Turkish population is between 15 and 64 years old and 25% are below the age of 15. Because of this demographic composition Turkey has a relative young population compared with other western European countries. A result of this young population is that Turkey has a very big work force and it is expected to increase more since the 25% from below 15 years old will be added to the work force in the next coming years (Turkish Statistical Institute).
Figure 1 (Turkish Statistical Institute)
The Turkish retail may offer an attractive investment opportunity for investors. Turkey showed the last years a strong economic growth, fast labor force growth.. But why do Turks prefer to shop in shopping malls instead of shopping in the streets and what makes shopping malls exactly successful in Turkey? In this Thesis I will explain the success factors of shopping malls in Turkey from the mall management side and where the opportunities and threats will be for the mall management.