The German investment market for retail real estate saw transaction volume of €3.4 billion over the first half of the year, up 7% on the corresponding period last year, but still well down on pre-COVID and 28% below the ten-year average. The number of transactions, however, fell year-on-year from 147 to 99.
According to Sarah Hoffman, head of retail investment at JLL Germany, "These opposing trends are possible because of the number of large transactions over the period. Seven deals alone achieved a transaction sum of at least €100 million, which came to a combined €1.3 billion. Last year there were four with a total sum of €815 million." So, fewer deals but at higher prices
Among types of use, specialist retail products were again particularly in demand, accounting for a total of 60%. Retail parks accounted for 31%, specialist stores for 22% and supermarkets for 7%. Commercial and department stores ranked directly behind with 17% and 16% respectively. The department stores' category benefited above all from the major deals for the "Galerie Lafayette" and the former Kaufhof on Hamburg's Mönckebergstraße. Further department stores deals in the bigger cities are expected before the end of the year, mainly development projects.
Who was doing the buying? German investors dominated the buyer's market with a share of 68% of the total transaction volume, although their share on the seller side was even higher at 76%, so that on balance they reduced their holdings by €300 million. With a 69% percent share, most of the investments were made in the Core-plus risk class. Core (19% per cent) and value-add (12%) made up the rest of the market.
Retail parks (3.5%), specialist stores (4.5%) and shopping centres (4.85%) could maintain their prime yields over the past two quarters, while values for properties in high-street locations also held firm - Munich at 2.4%, ahead of Berlin at 2.6% percent and Hamburg at 2.8%.
So overall retail has been proving itself surprisingly robust, although there have been downward price adjustments on current deals being done, albeit modest.
We reported in early-June that the sector looked like it was turning a corner, citing CBRE's latest "EMEA Retail Occupier Survey" highlighting retailers' expansion strategies.
Regional shopping centres and downtown high street assets were respondents’ preferred locations, with apparel and footwear retailers the top priority, according to the survey. Retailers are also tapping into the connection between brick-and-mortar stores and online sales in the same catchment area, with 64% of respondents seeing a correlation between their local presence and stronger online sales in the same catchment area.
“There is no doubt that the advancement of online retail is here to stay, but these survey results paint a more resilient picture for physical retail,” said Chris Gardener, head of EMEA retail at CBRE. “Occupiers have expansion plans on the agenda as they see real value in physical retail, something that can’t be replicated through online-only channels.’
Nonetheless, some regions in Germany remain challenging for retailers. According to research by German property association IVD, rents for retail outlets continue to fall in Bavaria’s major cities, with the exception of Munich, where rents have started to rise slightly.
On average across Bavaria, rents for high street stores in core locations have fallen by between 1.9% and 3.7% this spring, with rents also falling slightly in the secondary core locations, according to the IVD. Munich is now bucking the trend, according to the study, following a drop of more than 30% in some rents since the onset of COVID. Even in secondary core markets, rents have started to increase by between 2.7% and 4.5%, according to the IVD.
"Overall, the stationary retail trade, gastronomy, the hotel industry as well as the event industry, are definitely on the upswing in the spring of 2022 after around two pandemic years," said Dr. Stephan Kippes, regional IVD head.
