Turkey Enjoys a Boom in Malls
By William Echikson
1118 words
17 January 2007
The Wall Street Journal
English
(Copyright (c) 2007, Dow Jones & Company, Inc.)
ISTANBUL -- This metropolis has long been celebrated as a merchant's paradise, home to the famed Grand Bazaar and its colorful and crowded medieval alleyways.
Today, Turkey is gaining a new type of retail experience. About 30 minutes by car from the Grand Bazaar is the recently opened, futuristic steel-and-glass Kanyon mall. Well-dressed Turks saunter through boutiques selling $1,290 Yves St. Laurent suits and equally pricey bottles of Chateau Margaux.
Since Turkey's first modern shopping mall was opened less than two decades ago, construction of others has boomed. The country has 129 malls, the vast majority of which opened in the past five years, according to the Turkish Council of Shopping Centers and Retailers. A further 68 are under construction and 80 more are in the planning stages, the council adds. While investors originally concentrated on the two largest cities -- Istanbul and Ankara -- the new projects are spread across Turkey, particularly in fast-expanding industrial and tourist centers such as Konya and Antalya.
"We're just updating the Grand Bazaar tradition," says Avi Alkas, an Istanbul shopping-mall consultant who worked on the Kanyon project. Zoning permission for large facilities is easy to obtain in Turkey, he says -- in contrast to Western Europe, where laws to protect small shopkeepers make it "almost impossible to get a construction permit anywhere from Prague to Paris to build a new shopping center."
The explosion of glittering new malls underscores Turkey's huge economic opportunities -- and illustrates some of its challenges. Even as Turkey's negotiations to enter the European Union stall, the country continues to race ahead economically, displaying a pro-business attitude and flexibility that often surpasses that of Western Europe. Foreign businesses, from retailers to manufacturers, are flocking to the country, opening hypermarkets and car factories at a rapid pace. Turkish output rose by a third in 2002 to 2005, the strongest pace of growth in the Organization for Economic Cooperation and Development, whose 30 members include most of Western Europe and the U.S.
Turkey's progress remains fragile. Some fear the political freeze in its EU ambitions will lead to a loss of investor and consumer confidence. Widespread counterfeiting of upscale brands remains a threat: Even though laws call for fines and confiscation, enforcement remains weak. Overbuilding, and growing domestic opposition from small, mostly Islamic businessmen, could lead to legislation to protect small shopkeepers and crush the mall movement.
"It has gotten so crazy that two shopping malls are being built side by side," says Serdar Sunay, director of operations at Boyner Group, one of Turkey's largest retailers. "We have to be careful because we can put stores in only one mall."
Until recently, the idea of a saturated Turkish retail market was a joke. High tariff walls kept out modern goods, leaving shopping concentrated in street markets or typical venues such as the Grand Bazaar, first built by Sultan Mehmet II the Conqueror in the 15th century.
Economic changes in the 1980s began to lower tariff barriers and led to construction of the country's first modern mall in 1988 -- Galleria, near Istanbul's airport. The next boost came in 1996 when Turkey joined the EU's customs union and Western European retailers began pouring in. France's Carrefour SA, Germany's Metro AG, Switzerland's Migros-Genossenschafts-Bund and the United Kingdom's Tesco PLC have all made -- and continue to make -- big investments.
Foreign commercial-real-estate investors are now arriving. German developer ECE Projektmanagement GmbH manages seven hypermarkets and is developing one more. MDC Turkmall Market, a German-Dutch real-estate company, owns 10 Turkish malls and has 14 more planned.
Developers are stretching the mall concept in new directions. The $220 million Kanyon mall, which opened in June, is built around large open-air curved spaces that mimic a fashionable boulevard and allow musicians to play under a sculpted dome. The complex includes restaurants, cafes, 180 luxury apartments and a 26-story office building in addition to its 160 stores. All of the offices are leased and there is a waiting list for the apartments, says Markus W. Lehto, Kanyon's managing director. Two Turkish companies financed the project: Eczacibasi Holding, which owned an old factory on the site, and Is Real Estate Investment Trust.
The project is so successful that Is Real Estate is negotiating to sell a share in the project to foreign buyers. Several bidders have emerged, Mr. Lehto says.
"In Turkey, people have jumped right from a black-and-white TV to plasma screens, and their first telephone often was a mobile phone," Mr. Lehto says. "It's the same in retailing -- we don't have to follow any cookie-cutter design and are able to think out of the box."
The futuristic modern malls represent a clear break from the Grand Bazaar tradition of bargaining and haggling with customers. Prices are fixed.
"It's like being in Paris -- it's a great place to window shop," says Leyla Toraman, who has traveled from Izmir to Istanbul for shopping and is checking out flat-screen televisions and chic women's clothing in Istanbul's Akmerkez Mall.
Malls mix Western and Turkish brands. At Akmerkez, Prada, Ralph Lauren, Dior and Paul Smith outlets sit alongside Turkish stores such as Mavi Jeans and Beymen, Boynar's upscale fashion retailer. "Malls are popular because you can find everything here and the service is personalized and modern," says Pervin Saahin, a saleswoman at the Beymen in Akmerkez.
Few expect the demise of the Grand Bazaar, with its 4,500 stalls . More than 35,000 people still work there and 100,000 shoppers visit every day, according to the Turkish Council of Shopping Centers and Retailers.
"Shops in Akmerkez or Kanyon are more expensive," says Huseyin Saimsek, a carpet salesman in the Grand Bazaar who woos and haggles with potential customers in a half-dozen languages. While Turkey's new, Western-leaning middle class prefers malls, tourists visit the traditional Turkish shopping venues, he and other salesmen insist.
"You can't buy a water pipe or teas like this in a regular mall," says Grand Bazaar salesman Fettah Hatifoylu.
Tension is rising between small shopkeepers and modern retailers. Parliament is considering a bill to limit the size of new shops and the construction of new malls. The powerful Musiad business association, which represents traditional, Muslim entrepreneurs, supports it. "These malls are creating giant traffic jams and destroying our historic downtowns," says Omer Bolat, Musiad's president. Mall builders acknowledge that weak zoning has allowed them to tear down historic buildings
