The value of a commercial property is shaped by many factors — from its location, architectural design, and functional layout to numerous other attributes that directly or indirectly influence its worth. Yet, in the eyes of investors, the true market value of such a property is often defined by its lease agreement — the document that secures its actual income stream.
In Turkey, the 15-year period following 2000 was marked by remarkable economic stability: predictable exchange rates, single-digit inflation, and a strong Turkish Lira. These positive developments positioned the Turkish real estate market as a highly attractive investment destination for both local and international investors.
During this period, real estate investments significantly contributed to the rapid expansion of the retail sector. Shopping centers — serving as the driving force behind this growth — were largely financed through loans. As such, strong lease agreements, or even preliminary letters of intent with clearly defined financial terms, became essential for investors to secure financing and provide collateral. The favorable economic environment and the retail sector’s eagerness to grow and reach new consumers encouraged brands to sign robust, long-term leases with property investors.
Since many shopping center investments were financed in foreign currencies, property owners signed substantial, foreign currency–denominated leases with their tenants. These contracts strengthened asset valuations and boosted property values. Meanwhile, demand for income-generating high-street properties increased significantly, resulting in a surge of transactions supported by historically low interest rates. A similar pattern emerged across the office market as well.
After 2016, market conditions began to shift dramatically. The sharp appreciation of foreign currencies against the Turkish Lira, coupled with the 2018 amendment to the Law on the Protection of the Value of Turkish Currency, led to a new era in leasing. Lease agreements, which had long been denominated in foreign currencies with high fixed rents, began to be signed in Turkish Lira. However, these TL-based leases gradually lost real value in the face of rising inflation.
At this turning point, turnover-based rents — or variable rent components linked to sales performance — gained importance. To preserve asset values, particularly in shopping centers, investors started focusing less on high base rents and more on turnover rent percentages. This shift helped them maintain rental income in real terms. Tenants, on the other hand, found this model more sustainable — preferring agreements that offered flexibility and a fairer, win–win balance rather than high, fixed foreign currency rents.
Following the pandemic, TL-denominated lease agreements with moderate base rents but higher turnover rent rates — varying across sectors and brands — have become the prevailing market practice, except for specific cases such as publicly tendered projects. Over time, this model has spread beyond shopping centers to prime high streets, especially in Istanbul’s key retail destinations such as Bağdat Avenue, İstiklal Street, and Nişantaşı, where rent levels are traditionally high.
Incorporating turnover-based variable rent clauses in TL lease agreements helps protect these contracts from losing value over time due to inflation. This mechanism safeguards landlords’ and investors’ rental income, aligning it more closely with current market realities. In essence, turnover-based rent models ensure that rental income — and by extension, property asset values — remain resilient and market-relevant.
Although such models are not yet fully institutionalized on high streets, their wider adoption is expected to enhance the sustainability of lease agreements while increasing landlords’ income potential. Therefore, the broader implementation of turnover-based rent mechanisms is essential not only for maintaining property efficiency but also for strengthening the appeal of real estate as a sustainable, long-term investment vehicle.