Global retailers increase focus on Germany for expansion

German cities are continuing to gain in importance for international retailer's expansion plans, with four German cities featuring in the top-20 currently most desirable locations for new market entry, according to the latest study by international realtor CBRE. The report, How Global is the Business of Retail, sees Berlin in 5th position worldwide, after Paris, Tokyo, Hong Kong and Abu Dhabi. Frankfurt, Munich and Cologne also feature with Berlin in the top-20 list.

This is the seventh edition of CBRE's annual survey, which this year encompassed 334 international retailers from 61 countries, and 189 cities as retail locations. Among those 35 retailers opening stores in 2013 in Berlin for the first time were Apple, Primark, Michael Kors and Pull & Bear. Paris, heading the list, saw 50 international retailers make their debuts in the city. The figures were presented at a journalist briefing in Frankfurt last week, attended by REFIRE.

Last year (2012), by contrast, Berlin saw 28 retail brands setting up in the city. According to Karsten Burbach, CBRE's Head of Retail in Germany, "Compared with 2012, international retailers have been pressing forward with their German expansion. Berlin is now really benefitting from its status as a capital city, as well as from the success being enjoyed by the top retailers. It's also building on the attraction of newly-established retail hotspots such as Hackescher Markt and the Mall of Berlin on Leipziger Platz, while new developments on the Kurfürstendamm are also offering future new entry spots for retailers.

All in all, Germany saw the arrival of 40 new retail brands last year, putting it in fifth place worldwide, behind France, Japan, China and Hong Kong. A further CBRE study, just published, suggests that Germany will be the top country worldwide for new retail expansion in 2014, with about 40% of global retailers planning to open further outlets in the country. With US-owned retailers leading the field last year, Italian chains were the most active among the European retailers. 70% of European retailers plan to boost their German presence this year. Added Burbach, "Low unemployment, rising incomes and new jobs are alll helping to create a very strong consumer climate. The decentralised structure of the market, with six heavyweight metropolises and a further at leat 20 attractive cities make Germany one of the most desirable locations for a wide range of retail concepts."

Luxury labels are proving the most resistant on the German retail landscape, particularly in Berlin, Hamburg, Frankfurt and Munich - and in these cities, in the very top locations, where demand has seen prices soaring. This seems to be caused by international brand recognition supported by the internet, and the fact that many brands have reached saturation in their home markets and are forced to expand abroad.

Speaking at the same briefing, Daniel Herrmann, the Head of Fund Management Retail at Patrizia Immobilien, said that German retail rents and investment prices were still attractive for investors despite the strong recent rises. While peak yields are now comparable with other top European locations, rent levels have considerably more upward potential, he said. For investors, the increasing willingness of banks to sell off property portfolios bought and financed in the boom years of 2006 and 2007 provided further attractions, particularly in the retail segment just below what would be considered 'prime' or 'core'.

The food retail sector was holding up very strongly, even for conservative investors, he explained. Tenants had strong covenants, frequently long lease durations or good prospects of renewal, and a strong interest in holding on to their location. Given the shortage of real 'core' properties on the market, such 'core-plus' and even 'value-add' assets were proving very popular. These now include assets such as neighbourhood centres and shopping centres in top B-city locations, such as Münster or Regensburg, where yields were now on a par with the top A-cities.