FOR centuries, Istanbul lured intrepid shoppers with colorful jewelry and carpets that tumbled from shops in the ancient alleyways of the Grand Bazaar. Today, the city’s affluent young middle class is embracing a different kind of shopping experience in giant glass-and-chrome malls, whose rise strikingly illustrates Turkey’s emerging prosperity, but also spotlights some economic frailties.
Shopping malls are sprouting across Istanbul at a dizzying pace, with foreign money attracted by Turkey’s large, young and growing population of over 70 million. According to official data, per capita income surged to $9,333 in 2007 from $7,500 a year earlier and is expected to continue rising strongly.
“Organized retailing is coming alive and competition is growing, to the consumer’s advantage. The choice of brands is increasing and quality is rising,” said Turan Ozbahceci, chairman of PERDER, an Istanbul Retailers’ Association.
With around 2 million sq.m of retail space due for completion this year, Turkey has the third largest stock of malls being built in Europe, behind Russia and Spain, according to real estate firm Jones Lang LaSalle.
The sector is set to double in size within five years, expanding further into the Anatolian heartland, according to the Turkish Council of Shopping Centers and Retailers (AMPD).
But there are concerns that a glut of projects could flood the market just as global economic woes put the brakes on years of strong growth in this European Union-candidate country.
Economic growth last year dipped to 4.5 percent, after growth rates of 6.8 percent on average since 2002. The government has said it expects growth of 4.5 percent in 2008.
In places where there is a high concentration of shopping outlets, there have been some early difficulties in renting out retail space, forcing retailers to refocus their activities.
“The global volatility has caused a certain slowdown in Turkey and this is reflected in turnover and means retailers need to be more creative and look at efficiency and cutting costs,” said AMPD Chairman Nusin Oral.
Turks still shop at small grocers but malls are attracting the more affluent classes who want the convenience of shopping, dining and entertainment in one place.
“Turkish people have made the leap from grocers to shopping centers,” said Yusuf Esenkal, marketing manager at Istanbul’s Cevahir shopping mall, which is one of the largest in Europe and attracts tens of thousands of visitors daily.
“Starting with the Grand Bazaar, Turkish people have a 700-year-old tradition of commerce and because of that they were ripe for shopping center culture,” he said.
Among the palm trees at the Cevahir mall’s courtyard, head-scarved mothers queued with children at a face-painting stall. A minor TV celebrity encouraged shoppers to donate to a children’s literacy campaign as Turkish pop music blared out.
Foreign retailers are playing a key role in the expansion.
In February, private equity firm BC Partners led a consortium that bought a majority stake in the Migros chain, Turkey’s largest retailer, for $1.7 billion.
The previous month, British retailer Tesco’s Turkish chain Kipa said it would invest $1.5 billion over the next five years to open 100 stores. It expected the expansion to boost revenues to $5 billion once the new stores were operational.
French food giant Carrefour runs supermarkets with Turkey’s Sabanci Holding in a joint venture called Carrefoursa.
US retailers say they favor Turkey more than any other individual market, according to a recent survey of retailer attitudes to emerging markets by commercial real estate adviser CB Richard Ellis. Retailers cited the ease of foreign ownership as well as economic stability.
In April, Turkey’s prominent Dogan family said US property tycoon Donald Trump would build an office, residential and shopping complex in Istanbul with the Dogan Group.