ANKARA, Turkey — Turkish Deputy Prime Minister Ali Babacan sounded the alarm in 2014: Industrial investment was in decline while a construction boom was luring entrepreneurs to build shopping malls and luxury housing projects with the promise of quick profits. He stressed the need to encourage investment in industry, warning, “Or else we are becoming an economy that builds very luxurious buildings, spending its money on stone and concrete, without producing.” Three years on, the Turkish economy is far from a major industrial revival, while dozens of shopping malls languish in a financial bottleneck or are headed toward closure, in particular in Ankara, Istanbul and Izmir.

According to the Turkish Statistical Institute’s 2016 Income and Living Conditions Survey, the material deprivation rate — which reflects inability to afford items and payments, such as for one week's annual vacation away from home, adequate heating, a meal with meat, chicken or fish every second day or basic appliances such as a washing machine and telephone — increased to 32.9% last year from 30.3% in 2015. Released Sept. 18, the survey showed that 68% of Turks were indebted, while 14.6% were under the persistent risk of poverty and 14.3% lived under the poverty threshold. Meanwhile, the richest 20% of the population took in 47.2% of total income. No doubt, this state of affairs bears on the viability of shopping malls and the retail sector in general.

Since 1988, when Turkey’s first modern shopping mall opened, in Istanbul, the sector has flourished, attracting $53.5 billion in investment, including $15 billion by foreign chains and brands. In Istanbul alone, the number of shopping malls reached 116 last year, with Ankara second, with 33. The total nationwide stood at 379, up from 145 in 2007. According to surveys and projections by realty companies, the figure is likely to reach 443 by the end of 2017 and 448 in 2018. At the same time, however, 10% of existing shopping malls are in the process of exiting the market.

One major reason for shopping malls' economic problems is their widespread practice of dollar- or euro-denominated rents. In Istanbul, for instance, the rent per square meter is often above $40 ($3.70 per square foot), which, given the trend in the Turkish lira’s depreciation, has sparked a flurry of closures.