Local retailers displacing international and national chains on the high street
By Sara Seddon Kilbinger, Senior Reporter, REFIRE
Retailers and city centres face greater challenges with buying mood at all-time low
Local retailers are displacing international and national chains on the high street in Germany as city centre shopping redefines itself, according to the latest “High Street Report” by CT Real Estate Partners Germany and bulwiengesa.
The study examines the high street environment in 141 German cities, evaluating occupancy and tenant structures. Across all segments - retail, gastronomy and retail-related service providers - there was a decline in the level of chain store penetration this year compared to 2020: ‘In a phase full of movement and challenges, it is essential to have valid data on the status quo in order to be able to classify the development in the high streets and make forecasts,’ said Iris Schöberl, managing director Germany and head of Institutional Clients at CT Real Estate Partners Germany. ‘This year, we have seen that trends that were already emerging before Corona, and which were additionally accelerated as a result, are now slowly taking hold. This includes the consolidation of apparel retailers and some chain stores. The high street needs to redefine and embrace its future role. Retailers and city centres face greater challenges than before, but need to instigate transformation right now. With the changing demands on the high street, the tasks have changed, but it will continue to play a key role in the city,’ she added.
This year, CT Real Estate Partners Germany and bulwiengesa analysed over 150 high streets, around 150 downtown shopping centres, more than 7,600 tenants and around 19,600 stores, in order to compare market conditions in 2020 with today.
One clear trend is the consolidation of space, particularly on the part of national and international chain stores in the food and beverages, drugstore and healthcare sectors. Shopping centres in the city centre have lost 4% of their market share in the past two years, primarily due to the fewer number of tenants. And as consumers become more strapped for cash, multinational discounters are seeing business boom: Euroshop, Woolworth and Action have significantly expanded their presence in recent years, with store growth of 13%, 32% and 67%, respectively.
Number of apparel retailers falls
Apparel retailers account for 32% of all stores in German cities centres, although the number of stores in the locations surveyed has fallen to 6,227, down from 7,028 in 2020. The most drastic drop was in Munich, with the number of apparel stores down by 5.4% in the past two years, accounting for 33% of the whole market today. Stuttgart was the only city to record an uptick in the number of apparel stores, up by a modest 1%, although gastronomy outlets fell by 2.5% in the period to 16% of the total. Hamburg took the number one spot for gastronomy at 25%. Across all the high streets surveyed in the 141 cities in this year's report, the share of food and beverage outlets was 14%, 1% higher than in 2020.
‘In the further development of high streets, there are various factors that need to be considered and which are mutually dependent,’ Schöberl emphasised. ‘This applies to the Top 7 as well as to small and medium-sized cities. For example, more flexibility in change of use requires more flexibility in processes. To improve the quality of the experience requires greater integration of public spaces. And more ecological and economic resilience requires more rethinking and action.’
As such, the retail leasing sector will remain challenging for the rest of the year. Nonetheless, the first half of the year performed better than many expected. Around
218,400 square metres of retail space was taken up in the first half of 2022, an increase of 3.5% y-on-y, according to JLL. However, retailers remain cautious about the second half of the year in view of inflation, high energy prices and the overall economic situation.
Buying mood at all-time low
‘Persistently high inflation and people's associated worries have now pushed the buying mood in Germany down to the historically lowest level ever recorded,’ said Dirk Wichner, head of Retail Leasing JLL Germany. ‘Major purchases or investments are being postponed. However, it is to be hoped that this is only a snapshot in time and that consumer confidence will quickly return with the support packages from the German government.’
Overall, the market recorded 472 deals in the first half of the year, up 5% year-on-year. The second quarter was significantly stronger, accounting for 20% more leases than in the first quarter. More than half of them were for spaces between 100 square metres and 250 metres. The share of large spaces in excess of 1,000 square metres remained at 13%.
Demand for space in the ten largest retail locations started to pick up in the second half of 2021 and this trend continues. At 83,400 square metres, metropolitan areas account for almost 40% of the leasing volume, according to JLL. Cities that began the year with a significant increase in take-up, include Berlin (24,300 square metres), Hamburg (12,500 square metres) and Cologne (12,200 square metres). In the case of Berlin, demand has been boosted by international newcomers, such as the US restaurant chain Big Easy, US sports brand Lids and the Polish non-food discounter Pepco.
Prime rents fell by a further 1.8% nationwide y-o-y. Cities in the 100,000 to 250,000 inhabitants category proved to be the most resilient with a decline in prime rents of just 0.7%. In cities with more than 500,000 inhabitants, prime rents fell by 1.7%. The biggest declines have been seen in cities of between 250,00 and 500,000 inhabitants, where prime rents fell by 4.5%, according to JLL.