Bağdat Street: What went wrong? Could it be avoided?

A very similar retail downturn had occurred in 2008 economic crisis in Bağdat Street. In 2008, even though rents had decreased approximately 30% (to 100$ per sq. meters), around 30 shops were vacant. In 2011 all stores were full and rents per sq. meters has increased to 115$. Now it is 2016, per sq. meter rents has fallen from 130$ to 100$ and still there are lots of vacant shops.

But what went wrong and could it be avoided and to what cost?

What went wrong?

-Turkish Lira lost tremendous value in the last 3 years: 1$ was 1.80₺ now it is 2.90₺. Rents that are being paid with foreign currencies are mostly affected.

-In March 2014 Akasya Shopping Center opened. Akasya was a treat for Palladium Shopping Center and Bağdat Street. All three despite their differences in concept and sizes, were targeting similar customers who live in the same region.

-Urban regeneration focusing around Bağdat Street caused the region to be an on going construction site. Noise and traffic increased. People moving out of this area, caused a decrease in population, resulting a decrease of shoppers and increasing a feeling of insecurity. Among 39 boroughs of Istanbul, Kadıköy has the highest moving out rate with 15%. Among all the movers moving out of Kadıköy, only 43% moved back to Kadıköy. Istanbul Housing Report, TSKB, 2016, Q1

-In TEB Investment Report, it was shown that the retail sector will be the most influenced sector in minimum wage policies, since it has the highest number of workers working with minimum wage. There will be an adjustment period when profits can decrease. In long term the sector is expected to shift some of its production to other countries.

-After the conflict with Russia and suicide bomb attacks, there is a tremendous decrease in foreign tourists. It is thought that tourists purchasing ratio in retail sector can reach up to 10% in certain shopping centers in summer time.

-Even though Bagdat Street is composed of separate landlords and retailers, it is a unique organism that acts as a whole. The exit of a single tenant affects the other directly since independent brands position themselves with other brands and they share the same customer attracted by the other. As tenants began to form their exit strategy there was absolutely no one to convince them to stay.

Could it be avoided?

Most of the retailers that I had talked who were moving out had mentioned high rents and landlords not negotiating about the price, as their primary concern. The real problem is that landlords in Bağdat Street, even though they work with real estate agents, are totally indifferent to retail sector dynamics. And sometimes they handle the situation unprofessionally, resulting in try and see experimental management tactics. They need to unify for their own benefit and be guided by people familiar with retail sector.

Unlike a shopping mall, which can be organised in times of crisis, there was absolutely no single manager or professional who can talk or convince all tenants/landlords. As tenants began to move, more and more tenants began to have an exit strategy.

Can it be fixed?

Retailers could not afford to fix it on their own. Could they wait for 5 years for a profit? If landlords can come together and trust a firm or a professional to inform them and to form strategies for them, it can be fixed. However retailers now plan their stores for 2018, it is very unlikely that they will return within two years.

-Bahar Yayla, Architect