Rupert Birch in Istanbul -
Relentlessly marketed as the bridge between Europe and Asia, Turkey has benefited from a flood of foreign investment over the past decade and more recently its commercial capital is becoming a magnet for multinationals looking to benefit from local and regional market access. Accompanying this, of course, are the people to manage that investment.
"The Arab Spring has forced a number of companies to reconsider their regional headquarters," states Sinan Renda from DTZ Pamir & Soyuer, "and Istanbul ticks many boxes."
With these investments have followed a surge in expat managers and their families. Local relocation manager, Steve Pheby of Bedel Relocation, has experienced a growth in business of around 15% alone this year, driven mainly by incumbents increasing their investment here.
Whilst Istanbul dropped 26 places to 44th in Mercer's most recent cost of living survey, Pheby identifies schooling as one of the main issues affecting expatriate assignments to the city. "Two schools control around 90% of the market, with several other players offering education standards that many of our clients will not consider," he says.
Packaging giant Tetrapak, with its Greater Middle East regional office in Istanbul, typifies this. There are 11 children of varying ages amongst the six expatriate staff in the office, most of whom attend one of those two schools: Istanbul International Community School (IICS) and the British International School (BIS), whihc together have space for just over 1,400 pupils.
Since the explosion in foreign investment that the country has enjoyed since 2002, the two players have seen a surge in applications. "Over the past six years, we have increased attendance by 40%," states IICS's Jennifer Gokmen. "In an average year, you would be looking at an annual increase of 3%, but we haven't seen that for some time. I believe that we are up to 11% alone this year."
Similarly, BIS has experienced an average annual increase over the last five years of 9.2%, with this year being particularly good. Both schools are prevented by law from accepting Turkish nationals, although IICS limits dual Turkish nationals to 30% of any class.
Increased demand in this duopolistic environment favours the supplier, with both charging close to $30,000 per annum for high school and marginally less for lower years. Only Yerevan in Armenia is more expensive in the region, according to Mercer's survey. "Most parents are shocked by the cost of schooling, but at the end of the day it is the company who pays," says Bedel's Pheby.
Although housing is often cited as a serious issue, schooling comes top of the list in Istanbul and many companies are taking note. Jennifer Gokmen from IICS observes that: "Although there has been a significant increase in the number of expats arriving in Istanbul, we increasingly see companies actively choose childless managers or not including education allowance in the package. I believe this simply to be because of cost."
So is there an investment opportunity here?
Absolute numbers are hard to come by, but Bedel's Pheby estimates that there are between 5,000 and 10,000 foreign nationals in Istanbul who could be termed expatriate. BIS's William Bradley concurs that it is difficult to estimate the number of expats, though he says it's surprising for a city of Istanbul's size that, "we do appear to have a very small expatriate population."
Even so, there's certainly some space to create more places. "Our primary school is full to capacity and we have had to turn away a number of children from various years within our secondary school," says Bradley.
IICS is rumoured to be opening a new campus in a residential area favoured by foreigners and wealthy Turks for the next school year. IICS's Gokmen would only confirm the school was actively looking at opportunities to expand and an announcement will be made in October. "As a not-for-profit organisation, we plough all excess funds into a variety of programmes that will ensure that we remain one of the leading international schools in the world."
Gokmen would say that as part of the evaluation process, IICS estimates there are 2,000 children who fit their student profile.
And here's the crux of the matter: should a new entrant consider entering the purely expat market, there is clearly a capacity issue. But if you also take into account the dual-nationality market with all those newly-minted Turks, then the potential market is huge.
MEF International is attempting to bridge that divide by offering a dual-track approach; pure international and Turkish streams. Although not as popular as the two market leaders, MEF's fees are 30% cheaper and they have no problem in filling their classes.
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