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Retail space
Yield expectations in the retail park sector are still holding up, although they've now sunk under 5%, low but still ahead of high street stores and the problem child, shopping centres.
Despite fierce competition from e-commerce, stationary retail is ‘not a write-off’ just yet, according to a study published this month by consultancy BulwienGesa.
The study, ‘Retail project development 2017’, suggests that the naysayers – including investors, developers and the media – may not have got it completely right.
‘We’re happy to present the doomsayers with the facts,’ said Ralf Koschny, a board member at BulwienGesa. ‘German retail isn’t dead, it’s just moving to new locations. Its decline appears to have stopped.’
Germany’s retail development pipeline may have fallen slightly this year but Bulwiengesa is forecasting growth in 2018 and 2019. This year, 488,501 sqm of retail space is expected to be completed in Germany, which will rise to 620,874 sqm next year and 702,177 sqm in 2019, according to BulwienGesa. Retail parks make up the lion's share of development: 144,611 sqm of retail parks under 10,000 sqm will be completed this year, with an additional 70,645 sqm of parks exceeding 10,000 sqm scheduled for completion, according to BulwienGesa.
However, planning permission remains ‘challenging’, according to Koschny. ‘We have restricted planning laws in Germany, so it can be hard to get planning permission for projects outside established retail areas or even to get permission to extend a development,’ he told REFIRE.
German shopping centre developer ECE accounts for 5.5% of the German development pipeline, followed by HBB (5.2%) and Dutch developer Ten Brinke (5.1%). However, ECE’s pipeline is close to completion, leaving HBB with the most ongoing projects.
‘ECE is focusing on upgrades and extensions at its existing centres,’ said Dr. Jan Röttgers, head of ECE Development & Consulting. ‘This is necessary in the current climate.’
The top five retail developers in Germany – ECE, HBB, Ten Brinke, HGHI and Newport Holding – account for 20% of the overall development volume, according to BulwienGesa.
Unsurprisingly, the ‘Big 7’ markets dominate: 20% of retail development is earmarked for ‘Big 7’ cities. With around 30 sqm being developed per 1,000 inhabitants, the development pipeline there is more than double elsewhere in Germany.
