2025 YEAR-END REPORT: STRATEGIC REVIEW
In 2025, with tight monetary policy setting the direction for global and local markets, economic activity slowed in a controlled way and decision-making in real estate became more cautious. In Turkey, tight monetary policy and disinflation held back domestic demand in the short term, while currency stability and steady growth expectations created a more predictable market for the medium term. Against this background, the commercial real estate market, and the office sector in particular, went through a period of balance in which prices rose but transaction volume shrank. The office sector was squeezed between low supply, low demand and high rents.
The slowdown seen in the Istanbul office market throughout 2025 should be read as a build-up of postponed decisions rather than a structural weakness. Because of falling revenues, rising fit-out costs and high financing costs, companies put off moves and expansion and chose to renew leases or downsize instead. As a result, leasing volume contracted. Throughout this period, the limited Class A office stock and the absence of new supply in the near term allowed the market to hold its rent levels.
For tenants, 2025 stands out as a year in which office leasing decisions were postponed. As the market eases, 2026 emerges as the year to act on that postponed demand. Relatively stable rents can be seen as an opportunity for tenants in the new period. At the same time, because of the shortage of Class A stock, offices that meet tenants' criteria are expected to be taken up more quickly. With weaker demand and lower transaction volume, tenants can access good-quality options on more flexible lease terms. Fitted-out, ready-to-use offices in particular have become a clear advantage for occupiers who want to avoid high fit-out costs. Although rents are high compared with earlier periods, slower rental growth and landlords' focus on quality tenants have created room for negotiation in the tenant's favour.
For landlords, 2025 was a year in which the ability to wait mattered. Although periodic increases in vacancy and lower transaction volume put pressure on pricing in the short term, low vacancy and constrained supply remain the main support for rents in the medium term. The limited Class A stock in the Central Business District in particular shows that holding position is a more rational strategy for landlords than hasty decisions. With demand expected to recover, especially from the second half of 2026, rents should be able to move upwards again.
In the investment market, 2025 was a year in which the right price was critical. High interest rates and difficult access to finance made investors more selective, putting location, rental income and cash-flow potential at the centre of investment decisions. In this context, accurate pricing matters more than timing in office investment. For well-located assets with sustainable rental income and realistic pricing, closing deals without delay, regardless of market conditions, is an advantage for investors. The frequent use of sale-and-leaseback structures shows that office assets are still a strong option for investors. The high cost of new construction has also supported sales of existing properties.
Expectations for 2026 are more positive, especially from the second half of the year. Continued disinflation and the expected gradual fall in interest rates should support a recovery in domestic demand and bring office demand postponed in 2025 back into the market. Given limited Class A supply, high construction costs and few new projects, this recovery is expected to push rents upwards again.
In conclusion, the Istanbul office market showed a cautious but balanced picture in 2025. Tenants could afford to be selective and secure favourable terms, while for landlords the ability to wait gained strategic value. For investors, the market continues to offer opportunities to those who can act quickly where pricing is right. This layered structure shows that, despite short-term fluctuations, the Istanbul office market keeps its strong fundamentals in the medium and long term.
