Determinants of Office Rents in the Istanbul Metropolitan Area

Abstract

From the 1980s onwards, restructuring of economy and globalization has increased the number and size of companies in Istanbul and demand for office space accordingly. Indeed, Istanbul has become an attractive location for the international business firms due to its strategic location between Europe and Asia. Since the old CBD did not have sufficient space for the modern office building, multi-centre developments in Istanbul with different locational and physical characteristics were established. This study investigates the factors which effect office rents by the use of hedonic price analysis. According to the results of the analysis, the number of floors of the buildings is the most important factor to affect office rents. Other factors according to their importance are as follows: vacancy rate in the vicinity, social facilities in the buildings, aesthetics of the buildings, rental office floor, banks in the vicinity, and accessibility. On the other hand, management cost, age, view and distances to the old CBD and the major highways are not fund significant since these sub-centers are already located on major highways. The results of the study can be useful for the investors, real estate agents, urban planners, architects and policy makers. For further research, time series analysis of office rents is suggested.

Urban planning in office markets: A methodological approach

“…Besides, due to advancements in information and communication technologies -able to surmount the need for centrality -rent gradients slow down, thus rents keep high throughout larger territorial extensions (Sivitanidou, 1995). Centrality, thus, looses importance on behalf of greater flexibility in location/relocation patterns, as a result of international business, the development of transports and telecommunications systems, the investment levels, recent characteristics of firms, the suburbanization of services, and a polycentric distribution of employment poles (Ihlanfeldt and Raper, 1990;Rabianski and Gibler, 2007;Ozus, 2009). Thus many firms have moved, total or partially, to metropolitan suburban municipalities, where they take advantage of additional high-quality spaces at affordable prices/rents (Suda, 1997;Nitsch, 2006).…”

“…Thus many firms have moved, total or partially, to metropolitan suburban municipalities, where they take advantage of additional high-quality spaces at affordable prices/rents (Suda, 1997;Nitsch, 2006). This often implies significant changes in land and real estate uses and values (Ozus, 2009). And despite accessibility still keeps its central role, it does not express any more an easy physical access to certain specific key locations, infrastructures and transport services in a traditionally relevant area (Nitsch, 2006;Ozus, 2009).…”

“…This often implies significant changes in land and real estate uses and values (Ozus, 2009). And despite accessibility still keeps its central role, it does not express any more an easy physical access to certain specific key locations, infrastructures and transport services in a traditionally relevant area (Nitsch, 2006;Ozus, 2009). The extent of this variable is, currently, more generalized 11 and covers a broader territorial extent.…”

“…This implies, thus, a reassessment of the outline and relative importance of these variables, and of their impact on upper tertiary sector's rents. The traditional variable of distance to the CBD -based on a monocentric layout -does not fit the majority of actual European cities, that mainly exhibit polycentric layouts in services location (Archer and Smith, 2003;Greenhalgh, 2008;Jennen and Brounen, 2009;Ozus, 2009). Besides, due to advancements in information and communication technologies -able to surmount the need for centrality -rent gradients slow down, thus rents keep high throughout larger territorial extensions (Sivitanidou, 1995).…”

“…According to different theoretical and empirical studies, the main reasons that traditionally explain offices' locations and, consequently, their prices and rents are: (i) centrality/proximity to the CBD (Archer and Smith, 2003;Nitsch, 2006;Greenhalgh, 2008;Jennen and Brounen, 2009;Ozus, 2009), (ii) nearness to other businesses, namely banks, insurance companies, and financial institutions (Kutay, 1986;Shilton and Webb, 1995;Jennen and Brounen, 2009), (iii) amenities, facilities and local services (Bollinger et al, 1998;Din et al, 2001), (iv) accessibility and proximity to transports' infrastructures and services (Nitsch, 2006;Nappi-Choulet et al, 2007), (v) status, prestige and symbolic meaning of offices' location (Archer et al, 1990;Krätke, 1992), (v) positive externalities, including agglomeration economies (Leone and Struyk, 1976;Fagg, 1980;Mun and Hutchinson, 1995;Jennen and Brounen, 2009), (vi) increased value that results from the use of productive factors (Fogarty and Garofalo, 1988;Ihlanfeldt and 7 Few agents intervene in property transactions (what implies lack of liquidity), information is bounded (what shrinks transparency), and transactions are costly. 8 Geographic, economic and social characteristics of land are spatially changeable and planning and market interventions reinforce these divergences even more.…”