The Real Deal New York

Turkey’s economy is melting down. Will it hurt US real estate?

The country’s currency has plummeted, igniting fears of a spillover effect into other emerging markets
By Konrad Putzier and Keith Larsen | August 23, 2018 07:00AM

Turkish President Recep Tayyip Erdogan, New York City, and the Flag of Turkey (Credit: Getty Images, iStock, and Wikipedia)

As Turkey’s meltdown continues, so do fears that it could turn into a broader emerging-market malaise. But in the U.S. commercial real estate industry, the crisis hasn’t caused any jitters — and with good reason.

Companies from Turkey have bought just $231.4 million worth of commercial properties in New York City since 2000, according to data from research firm Real Capital Analytics. And even if the crisis spills over into other vulnerable emerging economies like Argentina, Brazil, India and Mexico, that might not change things either. Those countries, including Turkey, have bought just $4.5 billion worth of New York City properties since 2000.

Turkey’s currency, the Lira, plummeted earlier this month amid fears over the country’s economy. But concerns that an emerging-market crisis could follow have so far proved unfounded.

The last time several major emerging economies simultaneously crashed was the 1997 Asian financial crisis, which saw tumbling stocks and currencies throughout Southeast Asia. Although there were some warning signs that the crisis could spill over into New York real estate, “the market plowed right through them,” said RCA’s Jim Costello.

Even if there ends up being a spillover effect this time around, it’s far from clear whether it would be the bad kind.

On the one hand, turmoil in emerging markets could cause investors to buy more dollar-denominated assets, which should push U.S. interest rates down and property prices up. But there’s flipside.

“I think greater uncertainty is negative for investment volumes generally,” said Heidi Learner, chief economist at Savills Studley. “And the situation in Turkey only highlights the lack of clarity in the U.S.’ relationships with our other trading partners — namely, China.”

At the very least, Turkey’s crisis might open the door for investors looking for overseas bargains.

Hilal Borque, the owner of the Miami franchise of Turyap Realty, the largest real estate agency in Turkey, said last week that she has been fielding calls from people who are now seeing an opportunity to buy property in Turkey.

“They ask, where we can get deals in Turkey,” Borque said. “People are right now in a situation where they say ‘let’s invest’ because this is the cheapest it will ever be.”