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At the Expo REAL’s retail stands in Munich in early October, one uncomfortable truth kept cropping up: nearly one in five retail lettings in Germany’s city centres this year has come from former Galeria department stores. The Signa bankruptcy liquidation has become the defining event in German retail property, generating roughly 66,000 square metres across almost 40 transactions in the first nine months — compared with a long-term average of just 30,000 square metres, or 7% of the market, between 2020 and 2024.
Total city-centre letting volume reached 363,000 square metres according to BNP Paribas Real Estate, with JLL reporting 403,600 square metres. But the Galeria factor matters less for volume than for the shift in strategy it has triggered. “The aim was to reuse the space by several retail users instead of leaving a large multi-storey space to a single tenant,” explains Christoph Scharf, Managing Director at BNPPRE. The average size of re-lettings fell to just 1,700 m², down from 2,500 m² previously, as landlords pursued fragmented, multi-tenant approaches over traditional department-store formats.
Partnerships have replaced single anchors. Decathlon, for example, has taken smaller spaces in former Galeria sites, providing long-term covenants within diversified layouts. What began as necessity now looks like opportunity: monolithic buildings designed for one occupier are becoming mixed-use assets with multiple revenue streams and lower concentration risk.
Investment capital narrows to food retail while shopping centres reset
The letting surge contrasts with a muted investment market. Transaction volume reached about €3.9 billion in the first three quarters, according to CBRE (€3.9 bn), Colliers (€3.8 bn), BNP Paribas Real Estate (€4.1 bn) and JLL (€4.3 bn) — roughly 19% below last year’s level. Specialist stores and retail parks dominated, accounting for 69% of turnover. “Many investors continue to focus on food-anchored properties,” says Jan Linsin, Head of Research at CBRE Germany.
Aldi Nord has been an especially active seller, disposing of real estate to release capital for expansion while shifting from owner to tenant. The largest single deal was Austrian furniture giant XXXLutz’s acquisition of Porta Immobilien for a high three-digit million sum. French group Frey paid €230 million for Designer Outlet Berlin. According to JLL, retail now captures about 18% of total investment volume — second only to residential.
Shopping centres, though repriced sharply, are drawing opportunistic buyers. London-based Hayfin Capital bought Berlin’s Gropius Passagen — the city’s largest shopping centre, with about 95,000 m² of space, 150 tenants and €200 million annual tenant turnover — from Nuveen and Unibail-Rodamco-Westfield for just under €200 million, below the €240 million level reported earlier. Pradera will oversee the centre’s repositioning, adding medical facilities, improved accessibility and redesigned retail space.
The pricing tells its own story. Wealthcap sold the asset for €341 million in 2012; Nuveen and URW later invested €125 million in renovations. A sub-€200 million sale represents a deep discount, but with shopping-centre yields widened to 7–8%, only top assets such as Alexa in Berlin or Alstertal-Einkaufszentrum in Hamburg now trade near 5.5%.
While shopping centres adjust to lower valuations, prime high-street retail shows the opposite pattern. Yields for 1A locations fell 0.2 points to an average 4.44% in the top cities. “The reason is the strong interest of family offices in high-quality high-street properties,” explains Anne Gimpel, Team Leader Valuation Advisory Services at CBRE. Nicole Römer, Head of Retail Germany at Colliers, notes similar appetite from equity-rich domestic and foreign investors. Munich exemplifies the trend, with a series of prestigious inner-city assets currently changing hands.
Multi-functional transformation becoming the new model
Amid this structural reset, companies specialising in city-centre transformation are gaining momentum. Midstad — managing nearly 600,000 m² across 47 cities — operates nine active projects combining retail, office, residential and hospitality uses. Managing Director Kevin Meyer articulates the philosophy directly: “We often planned without considering people and only built for the capital market. That should come to an end. Multifunctionality is key to urban revitalisation.”
Midstad’s conversion of Peek & Cloppenburg (P&C) stores into mixed-use properties has produced tangible results, with office space pre-let at prime rents. Conscious of inevitable Signa comparisons, Meyer stresses the firm’s conservative approach: “I am sometimes asked: Are you the new Signa? No, we are not.” Midstad’s loan-to-value ratio stands at 30%. Notable projects include Frankfurt’s Zeil 71–75 (~36,000 m²) and Vienna’s Mariahilferstraße (~23,500 m²), both transforming former department stores into flexible multi-use properties.
The company’s research partnerships with EBS and TU Darmstadt, together with new senior appointments, suggest growing institutional maturity. Its formula — conservative financing, curated tenant mix, and genuine placemaking — represents a deliberate shift away from the speculative landlordism that fuelled the Signa implosion.
REFIRE: The Galeria liquidation has accelerated a transformation already under way in Germany’s city centres. The 20% market share of former department-store lettings reflects emergency repositioning, but the strategy shift toward smaller, multi-tenant configurations signals a lasting structural change.
Investment capital shows clear polarisation: food-anchored retail parks offer stable cash flow; shopping centres trade at deep discounts for repositioning plays; and prime high-street assets remain defensive as family-office money compresses yields.
Execution, however, is the true differentiator. Reviving urban retail now requires operational skill and strategic tenant curation. Midstad’s model — disciplined, flexible and human-centred — points the way forward. The Galeria collapse provided the catalyst; what follows will test whether investors have the sophistication and patience to turn crisis into urban renewal.