Bosporus Boom

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ON WEEKENDS, THE LINE AT ISTANBUL'S Mangerie, a hip rooftop restaurant with views over the Bosporus Strait, stretches three stories down the stairs toward the street. On a recent Sunday, Defne Kocabiyikoglu, 28, a design consultant, and her boyfriend, Baran Baran, 30, a motion-graphics animator, were settling into a Turkish brunch of kasar cheese and sesame-sprinkled simit pastries and expounding on the fashion constraints of the city. While Kocabiyikoglu can get any clothes she wants—favoring fashion-forward labels like Roksanda Ilincic and Tina Kalivas, which she buys online and mixes with local finds, she points to her Chanel ballerina pumps and adds wistfully, "I'd love to wear higher heels, but you just can't. Have you seen the state of the sidewalks?"

Of course there's a lot more to look at than your feet in this ancient city, although the poorly maintained sidewalks and snarled traffic do explain why freewheeling Istanbullus—as locals here are known—prefer to get around by boat when they can. Newly reinvigorated by a burgeoning young population of trendy, extravagant professionals like Kocabiyikoglu, Istanbul is suddenly the focus of luxury-goods purveyors looking to expand in what up to now has been a small market. Fendi has three retail doors with a fourth on the slate, Louis Vuitton is expanding its small store on the Asian side of the Bosporus next year, while Dolce & Gabbana, Dior and Prada are all actively looking for appropriate sites on the European side.

For those with a taste for history, it should be no surprise that a young style maven like Kocabiyikoglu—who surfs style.com daily and currently has her heart set on a Christopher Kane minidress—is open to fashion forces from the wider world. After all, the city once known as Constantinople has been on trade routes since Byzantium. But Istanbul has experienced years of economic uncertainty, including Turkey's financial collapse in 2001, which analysts equate in severity to the U.S.'s Wall Street Crash of 1929. Fortunately, by 2005, inflation was brought into line and the Turkish currency—the lira—was revalued, offering a new stability.

"This is a market where [the customer] doesn't want what her girlfriend has; she wants something different," says Fendi CEO Michael Burke, who became intrigued by the Istanbullu consumer when he clocked Fendi's wholesale demand rising over $1.28 million. "The definition of luxury here is individuality, as opposed to the more Eastern approach which is, 'I'm buying to belong.' In the West, you are buying to be different. In that sense, Istanbul is Western—although of course, it's also the gateway to the East."