Last Updated on 20/04/2023
Buying a commercial property in Turkey includes different types of real estate. In fact, you can invest in a hotel, buy a restaurant or a store, or any other commercial asset that provides a strong return on investment. According to experts, investing in a commercial property in Turkey, might carry more immense risks than residential ones. Yet it provides a higher monthly return on investment. Moreover, it guarantees high, long, and assured rents.
Let’s figure out together some of the encouraging facts to invest in commercial property in Turkey.
Reasons to invest in commercial properties in Turkey
High ROI of commercial properties in Turkey
The investment in a commercial property in Turkey provides a higher return on investment than residential real estate, particularly in recent years when real estate prices have risen dramatically. The typical rental revenue for commercial assets, such as stores, is between 8 and 10%. However, the average rental income for residential homes is 6 percent, which varies by region and country.
Investing in a commercial property in Turkey, according to some experts, is the safest sort of investment since it provides a guaranteed and more lasting revenue.
Extended rental agreement
Tenants of commercial property in Turkey or any other place in the world are more likely to stay in their jobs for long, especially if they put some money into the property from the outset. For example, suppose the tenant decides to increase the space by investing an important amount in the project. In that case, you will have some rental revenue certainty and assurance, which will make calculating the return on investment easier in the future.
Reduced utility expenses
Tenants typically fund the property’s expenses, such as revenue, in commercial properties. Water, insurance, and corporation fees are less expensive than residential properties’ management fees.
Capital increase of commercial property in Turkey
Commercial real estate generally has a higher value than other property types, thanks to the high demand. And this is one of the incentives to invest in a commercial property in Turkey. Besides, the features of the property, such as the size, location, and finishing, will increase the real estate value, and the potential investment revenue will also increase. In fact, commercial properties that are situated in the heart of a city where demand is growing will definitely bring an optimal profit.
Buy a commercial property in Turkey or rent it?
The answer to this question depends on many circumstances, first of all, the budget. Obviously, the total cost of purchasing a commercial property in Turkey, including the price, legal fees, and other expenses, will cost more at least for the first five years than paying rent. However, owning the property will be more beneficial for the next five years and beyond. And the rent payment might become a heavy burden with the real estate value increase. Moreover, the second essential factor is the reason why you want to have a commercial property. Is it to set up your own business or to make an investment and profit from the rental income. Maybe for small businesses with a limited budget, it is more recommended to rent the property as a start. However, we advise investors who intend to do big business and don’t have budget problems to buy a commercial property in Turkey.
Furthermore, buying a commercial property will guarantee you several benefits. In fact, you won’t have to worry about the annual rent increase. The continuous growth of real estate value in Turkey will allow you to make capital growth and even mortgage the property if you need extra funds for your business. Besides, owning the property will guarantee you more freedom to customize the interior design according to your preferences.
What kind of commercial property in Turkey is worth investment?
Again, this question’s answer depends on your purpose in acquiring the commercial property. According to the business type, you should determine the needed size, storage space, parking, and floor number… Moreover, the location and the environment are essential to boost your business. For example, you might need banks in the surroundings. These kinds of features are necessary to help you select the commercial property in Turkey that you need.
Furthermore, there is another primordial factor. You need to ensure that the property already has the license to be used for commercial reasons. This kind of information is generally mentioned in the title deed.
Commercial real estate in Turkey post-Covid
Now, with all the benefits and the encouraging features mentioned above, we still recommend you to think wisely before taking such a step. If you are willing to invest in big commercial properties in Turkey, such as hotels, big shops, shopping centers, or important companies, we still encourage you to consider this type of investment. However, if you have a limited budget and you think of making a profit from small retail shops in Turkey, it is not the right time. In fact, the Covid pandemic brought new approaches to our lives that had an impact in all sectors almost.
To clarify, with the rise of internet shopping (over 300% increase since 2015), more and more people are choosing online shopping as opposed to retail outlets. Therefore, it is expected that by the year 2025, at least 40% of all independent retail outlets in Istanbul will be shut and out of business. This trend has already happened in cities such as London, Paris, and New York. So, we should encounter the same trend in Istanbul now. Consequently, this implicates many facts; you will struggle to find credible tenants. Besides, it is also hard to get long-term tenancy contracts for small businesses. Moreover, you will find it hard to sell and exit in years to come.
Currently, rental returns on commercial outlets in the Taksim area are around 3%. We agree that it is not an encouraging investment rate. It is due to the high freehold values of real estate in these areas. However, to the diminishing profitability of retail shops, rental incomes are not catching up. These trends are already happening in the UK, Western Europe, and the US; Turkey will eventually follow. Therefore, we don’t recommend commercial properties for budgets less than 800k$.
What is the best Post-covid investment alternative in Turkey?
Commercial properties are a part of a more developed sector which is the real estate market in Turkey, including residential real estate. Therefore, you can find in this sector many options for different budgets. Especially with the consequences of the pandemic, residential sales in Turkey have reached the highest levels. You can check house sales in Turkey in March, April, May, and June 2022.
For instance, Istanbul has a population of 18 million people growing at a rate of 5% per annum. The future demand for real estate in Istanbul is, therefore, from young and aspiring professionals and newly married couples with or without kids. This is a vibrant segment with high future income potential. So with affordable luxurious residential property, you can expect
In short, the segment to go into is the affordable luxury segment. With the right investments, you can expect the following returns 6% rental income rising to 8% by year 4 to 5 years. Moreover, you can get 10% annual growth hence over 50% in 5 years.
See more advantages of buying property in Istanbul.
If you want further details about investment in Turkey, MEO Consultants offer you a complete advisory. Our experienced team gives you also full-service consulting if you commercial properties for sale in Turkey.
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