A historic quarter of Istanbul regains its place in the sun

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The transformation of Pera in the past 10 years has been extraordinary. When I first started coming to this side of Istanbul, just after the millennium, Pera was old, dirty and unnerving. There were streets off Istiklal Caddesi where, as a tourist, you did not walk. The bar in the Pera Palace Hotel was so dingy I'd swear it had not been painted since Agatha Christie holed up in a room with a rickety brass bedstead.

Now Pera, the rocky quarter traditionally frequented by Europeans, is bright and buzzing. The International Pera Piano Festival begins on 7 May, followed three days later by the Istanbul Theatre Festival (10 May-5 June), which uses Pera and various neighbourhoods nearby. Then, at the end of May, the Istanbul Music Festival (31 May-29 June) kicks off with two of its venues in Pera and street musicians dotted along the newly affluent Istiklal Caddesi.

How has this happened? To find out I sought out Gencay Ucok, an Istanbul Mr Fixit who knows everyone and who is also – somewhat to his surprise – the proprietor of the most gay-friendly restaurant in Turkey. "I've no idea how that happened," he laughed when we met. "I guess people came in and we weren't unpleasant at Meze. Pera is a place where it's OK to be Other."

We were sitting in SALT, a newly opened arts centre inside a lofty old bank. The bar on the top floor has panoramic windows that gaze out across the Golden Horn estuary to the Ottoman palaces of Sultanahmet. "This was always where the foreign traders lived," Gencay told me as we perched on our bar stools. "In fact Pera means 'other'. We're the other Istanbul. The New Istanbul. Only these days, it's safe to walk about. Yes, my friend, you're right. This place has changed so much in the last few years!"

I knew from history books that Genoese traders were in Pera before the Ottoman conquest. From up here they watched Constantinople fall and mosques spring up on the skyline opposite. This quarter, also known as Galata-Beyoglu, is a dark, steep rock of vertiginous buildings crowned by the Galata Tower. Until the 19th century, when foreign embassies began building their palaces outside the city wall, Pera was about as crowded an enclave as you could find.

Pera was also where Graham Greene, Pierre Loti, Mata Hari and Ernest Hemingway felt at home, all of them propping up the bar of the Pera Palace at some time or other. Trade, banking, diplomacy and espionage made Pera-Galata-Beyoglu famous.

"So what went wrong?" I asked Gencay as we ordered more Turkish lager. Gencay's answer takes in diplomats and financiers moving to Ankara after Ataturk made it the new capital in 1923, and the flight of Greek and Armenian Christians during the religious tensions of the 1960s.

"Pera emptied. And at the same time the government was encouraging everyone out of the countryside and into the big cities to turn Turkey into an economic powerhouse. Poor people from the east, drug-dealers, alcoholics. They took over Pera, making it unsafe. That was the Pera you remember from 10 years ago."

Leaving SALT, we took a tour of the tunnel-like streets that run between five- and six-storey tenements. I saw a lot of rebuilding and restoration, but no danger or squalor. Down Serdar-i Ekrem Caddesi, we called in on the clothes designer Bahar Korcan, who has an upmarket boutique in a showroom stripped back to ancient brick walls.

Bahar's jackets revisit the Ottoman-style, using Anatolian flower patterns on tweed or traditional silver embroidery over patchwork. Next we walked across the road to take tea with Janset Bilgin, who makes and sells her own jewellery and who moved here only last year.

"In 2006 everyone thought Bahar Korcan was brave moving into a street like this," Janset told me as we perched in her workshop. "But she has shown that it's possible."

Gencay pointed out that an apartment bought in this street two years ago for the equivalent of £140,000 might change hands now for £1m. What, I wondered, was driving this rapid gentrification? I got my answer when we headed for our next stop, Istanbul's number-one nightspot, Babylon. If the great rock on which Pera rises from the Bosphorus were some slumbering mythical giant, then Istiklal Caddesi would be its spine. Two million people shop on this long, pedestrianised street every day – and two things were obvious as we zigzagged through the crowds: these people are young and they have money.

"Our population explosion happened in the 1970s," Gencay yelled as we were almost separated in the crush. "Remember what I said about the government encouraging people to come into the cities? Well, they came in droves and they had a lot of children, and nowadays those children have money to spend!"

We dropped a few streets down the other side to locate Babylon. The venue is a low shed in between two tall old buildings, but it's proved so popular with the youth of Istanbul that it now has its own magazine and radio station.

Next we headed down past the Pera Palace Hotel in search of a new art gallery that Gencay wanted to show me. I'd already looked in at the Palace. It reopened in 2010 after a phenomenally expensive refurb that was so bright and shiny that they recently had to repaint the bar to make it dark again. An essential loucheness had been lost.

The gallery, known as Galerist, turned out to be a conversion of some old Ottoman offices overlooking a car park that Gencay said would soon be a new Frank Gehry building. "Well, that's the plan."

Galerist is the initiative of architect Melkan Gursel Tabanlioglu and the art collector Taha Tatlici. "Together they want to promote contemporary Turkish art worldwide," said the manager as she gave me her card. "And to connect Eastern and Western cultures. Istanbul being the junction, you know." A number of lean young things in expensive T-shirts were engaged in hanging a new exhibition. Galerist was clearly doing well.

Gencay kept us walking. Dropping back down the other side of Istiklal Caddesi we came upon a new museum of Turkish cinema. Wall after wall of famous faces I did not recognise and posters for derivative films such as Tarzan in Istanbul or Charlie Chaplin in Istanbul (with the Little Tramp played by a Greek actor) as well as whole genres that do not exist outside Turkey.

Further down the steep streets we found a new boutique hotel called The House. It is indeed a tall old house that rises up like a sentry box, with just two rooms on each floor and a bar in the rafters. The original marble staircase runs all the way to the top. (One of the great benefits of the area's long decline is that so many period features were just left to gather dust rather than being stripped out.)

Gencay was all for going on to check out progress at the new Marti Hotel as well, which is at the Taksim Square end of Istiklal. It's another conversion opening this summer, and much talked about because the designer is Zeynep Fadillioglu, the first woman in Turkey to design and build a mosque. However, I had dinner booked at Dai Pera, not far from the Istanbul Modern, the big art gallery recently converted out of an old Ottoman arsenal on the Bosphorus.

Dai proved to be a very small restaurant recently opened by Arzu Gurdamar, who worked for 12 years in a shipping office before deciding she wanted to offer travellers typical food from Istanbul. It took her many months to find her dream location, she explained as we drank a few glasses of some excellent Turkish wines.

"I wanted to give people the kind of food we eat at home. Istanbul food. That can be Armenian, Greek, Genovese or Turkish, but not just Turkish. I will never sell kebabs because the kebab is not from Istanbul."

Dai is a narrow, intimate dining area, barely two tables wide, with Arzu cooking 12 hours a day in the cellar downstairs. Like everyone I'd met on this busy day, Arzu was fiercely proud of the winding streets of Pera. "It is like SoHo in New York or Soho in London but at the same time it's not. Istanbul is 8,000 years old. We are not like anybody else. They are like us!"

Travel Essentials

Getting there

Istanbul's main airport, Ataturk, is served by Turkish Airlines (020-7471 6666; turkishairlines.com) from Birmingham, Heathrow and Manchester; and by British Airways (0844 493 0787; ba.com) from Heathrow. The secondary airport, Sabiha Gokcen, is served by Pegasus (0845 0848 980; flypgs.com) from Stansted, and easyJet (0843 104 5000; easyJet.com) from Luton and Gatwick.

Staying there

The writer stayed at the Four Seasons in Sultanahmet (00 90 212 402 30 00; fourseasons.com/ Istanbul). Doubles from €529 (£433). The House Hotel, Galatasaray (00 90 212 244 3400; thehousehotel.com). Doubles from €118. The Pera Palace Hotel, Beyoglu (00 90 212 377 4000; perapalace.com). Doubles from €245.

Visiting there

Meze restaurant (00 90 212 252 83 02; mezze.com.tr); SALT arts centre and bar (00 90 212 377 42 00, saltonline.org); Bahar Korcan boutique (00 90 212 243 7320; baharkorcan.org); Babylon Lounge (00 90 212 292 73 68; Babylon.com.tr); Galerist (00 90 212 252 1896; galerist.com.tr); Istanbul Modern (00 90 212 334 7300; istanbulmodern.org)

More Information

Gencay Ucok of KD Tours (00 90 212 236 5161, kdtours.com) offers half-day tours for US$150 (£93). Turkish Culture & Tourism Office (020-7839 7778; gototurkey.co.uk). The Istanbul Foundation for Culture and Arts (iksv.org).