Cekirdek Turkish Logistics Report 2013
Turkey plans to be one of the top 10 global economies by 2023. Stable macroeconomic growth over the last decade has resulted in an expansion of international trade. Trade in Turkey has been rising significantly and the region has more of a presence in world trade. In 2012, 1.2% of all global trade volume was conducted by Turkey. Turkey’s share in global trade is expected to exceed 1.5% by 2025.
Turkey’s advantageous geographical location that stretches from Asia to Europe and Russia to Africa, allows it to be a hub for over USD 2 trillion freight carried in the region.
A strong and diversified economy will contribute to the expansion of the logistics industry. Since many industries support or rely on the logistics industry, their growth would indirectly stimulate growth in logistics.
Global logistics players are keen to invest in Turkey because of the growth potential within the Turkish economy and its proximity to Europe and Asia. Turkey has already attracted big global players such as DP World and APM terminals.
Turkey has one of the largest and youngest labor pools in Europe with more than 65% of the population aged between 24 and 54. The strength of Turkey’s labor force is reflected in the logistics industry. Investors can easily hire a talented workforce at competitive costs to address the complex demands of the industry.
Turkey is implementing rail freight corridors, coastal freight corridors and international highway corridors to become a leading logistics hub. These corridors will support the movement of a greater volume of traffic between countries neighboring Turkey.
Turkey is building logistics centers/villages that will serve to lower the costs of transportation by offering various different modes of transportation within these centers/villages. It is estimated that by 2023, total freight carried in the centers/villages will reach a total of USD 500 billion. According to TCDD’s investment program, TCDD plans to spend TL 514.9 million on building these logistics centers/villages.
Turkish 3PL companies will take advantage of these decreasing costs and will increasingly move into international markets through ventures and acquisitions. For example, Horoz Logistics has started airway and seaway transportation between Turkey and Africa through Bolloré Africa Logistics.
The Economist Intelligence Unit projects Turkey’s GDP growth at 3.5% in 2013 and over 5% per year between 2014 and 2017.
Between 2013 and 2017, Turkey’s GDP is expected to grow more rapidly than the average of all 27 EU countries, as well as the Eastern European and CIS countries.
Turkey is in close proximity to other leading emerging markets where foreign trade has been increasing: Foreign trade volumes of the Middle East, African countries and CIS countries are following a growth trend.
In terms of international trade and the logistics regarding goods, Turkey is positioned on a traditional and historic trade route between Asia and Europe, thus making it a significant hub. As Asia’s growth continues, Turkey will be able to reach its full potential as a hub in international trade. According to the IMF, Turkish exports will grow on average more than 5% from 2013 to 2017, while import growth will exceed 9.5% during the same period.
There are 19 free trade zones in Turkey, where export-oriented production is encouraged and no legal or administrative legislations is applied (or partly applied). There are many advantages and incentives to companies on free trade zones, which can be summarized as:
Companies are exempt from corporate and income tax until Turkey becomes a European Union member*.
Companies, who at least export 85% of the products’ FOB value have a right to deduct employee salaries from corporate tax,
Companies are exempt from VAT, and customs tax,
Profits can be transferred domestically or to abroad without any permit,
Companies have easy access to world class infrastructure,
Any monetary transactions of companies are conducted by foreign currency. Therefore, companies are not affected by inflation.
Aegean free trade zone has the biggest share of the total trade volume with 23% followed by Mersin with 17%.
Total trade volume in free zones exceeded USD 23 billion, in 2012.
Emerging markets slowed along with the rest of the global economy in 2012. The impact of the European crisis, years of continuing stagnation in Japan, and fiscal uncertainty in the United States, weakened trade and financial flows, resulting in slower growth than was expected for many emerging economies. However, their economic performance was still generally stronger than that of developed markets. The 45 countries in the Index grew at an average of 4.4%, according to the IMF. The U.S. economy grew at a 2.2% pace; the EU contracted 0.2% (provisional estimates). Consequently, the developing world continues to remain at the forefront for investors. While the BRIC countries (Brazil, Russia, India and China) have played a significant role in global growth for a number of years, other emerging markets are now showing increased promise as potential investment alternatives. There are signs that increased labor costs and skill shortages are eroding China’s once-commanding edge over other markets. That said, China continues to benefit from strong domestic growth and acts as a major driver of growth in the global economy. Separately, increasing transport costs are driving decisions about preferred production locations. “Near-sourcing” – the effort to control costs by producing in countries adjacent or close to major destination markets — is again on the rise. Markets close to the United States and Europe, such as Mexico and Turkey, are attracting increased attention.
Offsetting the near-sourcing trend is the growing attractiveness of more distant emerging economies as consuming markets. Weakened demand in Europe, the United States and other developed economies means emerging markets have been less able to depend on these countries as export markets. At the same time, several of the larger, more advanced emerging economies are fueling demand and have become attractive consumer markets. That has powered increased trade between emerging markets and led to development of vibrant retail sectors, increasing opportunities for domestic-based logistics operations.
In 2013, emerging markets growth will still depend heavily on demand from Europe and the United States and the overall health of the global economy. Despite or because of political change, the “Arab Spring” countries face significant hurdles before they become attractive investment opportunities. Elsewhere, Sub-Saharan Africa continues to draw increased attention, despite uneven performance. Due to the region’s low-exposure to the European crisis (except for South Africa) growth rates in top
performers have remained reasonably strong.
Mexico moved up one place in the 2013 rankings to ninth position. Its improvement follows two consecutive years’ of decline. Mexico has benefitted from an increase in U.S. demand; in particular, automotive manufacturing has increased. Lower labor and taxes have brought interest from high tech
and aerospace manufacturers. The ”near-sourcing” trend benefits Mexico. Some American companies
want to move production closer to the end market. This trend may also be benefitting Turkey, which moved up one place in this year’s rankings. Turkey’s proximity to Europe makes it attractive as a low-cost
manufacturing location. Despite little change to its score, Chile fell two places this year, behind Mexico and Turkey. Considering the emerging market list of 45 countries (from logistics aspect), Turkey is the 10 th place. Turkey will emerge as 6 th major logistics market in the next five years (following China, India, Brasil, Russia & Indonesia)
Location of A Class storage bases (where to invest) :
A-class storages and warehouses are the storages that are owned or rented out by local and international logistics operators. 85% of the A-class storages are generally in Istanbul (Asian side of Istanbul) and in Gebze (Asian side of Istanbul). European side of Istanbul is not very suitable for any kind of logistics business.
In Turkey, there is an 8 million m² of high and low quality closed storage area throughout Turkey. 0,7 million m² of this stock is comprised of only A-class storages. Therefore, other than the shortage of supply due to current demand in Turkey, there is also a shortage of storage area with modern standards.
The 82% of the total stock in Turkey is in Istanbul (Asian side) and Izmit’s Gebze town where most of the industrial and manufacturing facilities are centered in.
Total Storage Areas of Some of the Logistics Operators (m²):
Barsan Global Logistics 700.000
Borusan Logistics 450.000
Ceva Logistics 300.000
** Ps: please e-mail me to find out more about the stated logistics service providers above
The logistics activities, which are increasingly stuck in the city center due to population growth in Istanbul, are causing urban problems with the load they put on the transportation network and this situation negatively reverberates on the logistics providers as time loss and incremental costs. Therefore the storage areas in Istanbul are beginning to be located in ‘Tekirdag & Luleburgaz’ on the European side and in ‘Gebze & Derince’ on the Asian side.
Even though the estate prices and rents are cheaper on the European Side, Asian Side where the industrial settlement has been much more organized (risk free) and developed is more popular.
However, the Dudullu and Samandıra/Sancaktepe (especially Samandıra area is not recommended) regions of the Asian Side have started becoming more and more expensive regions regarding logistics due to residential estate zonings (by the Turkish government). On the other hand, Gebze, Derince, Pendik and Tuzla (Sekerpinar) regions on the perimeter, with their strong port, airport, railway and expressway links have started being logistic regions that attract more investment (both domestic & foreign).
While an average storage rents in Pendik have increased to 6,8 € per m² , it has gone upto 4,8 € per m² in Tuzla and Gebze. However, the rents of some of the good quality A-class storages of the latest standards with almost 15 meters of ceiling height might go up to 12 €/m².
On the European side, the regions with the highest storage rents are Yenibosna-Halkalı-Ikitelli loop because of its close proximity to the city center/downtown. The average monthly rent in these regions are
5,2 €/m². On the other hand, the m² rentals in Çatalca and Hadımköy regions, which are still developing in terms of logistics (infrastructure & development plans for the stated areas are still blurry), are approximately 2,6 € and in Silivri (better area according to Hadımköy & Çatalca) on the perimeter they are approximately 2,8 €.
Currently in Istanbul, there is need for approximately 1 million m² of A-class storage area. However, the shortages of transportation and physical infrastructure and the lack of sufficient organization among logistics users in terms of A-class storage use, are creating obstacles with regards to promptly meeting the storage demands. There is a limited number of logistics storage projects developed to be put into service in the following years. Logiturk, one of companies that develop real estate in the industrial and logistics areas, has been working on two storage projects with closed areas, one in Esenyurt for 55.000 m² and in Tuzla for 122.000 m². Otherwise, DHL has announced that it would be increasing its storage areas to 500.000 m² in 2012. It is known that several middle-scale logistics operators are making plans towards expanding their storage areas.
** Ps: please e-mail me to find out more about the rents & knowhow
Istanbul Real Estate Valuation and Consulting Inc., (2012). Istanbul valuation. Retrieved from website: http://www.igd.com.tr/Files/LXAAFD84A7A01C69FE.pdf
(2013). Agility emerging markets logistics index 2013 . Retrieved from Transport Intelligence – Expert Research & Analysis website: http://www.agilitylogistics.com/EN/Documents/Agility_Downloads/2013_Emerging_Markets_Logistics_Index.pdf
Republic of Turkey Prime Ministry, Investment Support & Promotion Agency (2013). The logistics industry in turkey. Retrieved from Deloitte website: http://www.invest.gov.tr/en-US/infocenter/publications/Documents/TRANSPORTATION-LOGISTICS-INDUSTRY.pdf