Shopping centers now boast a broader range of services, including health-related options, entertainment facilities, and food retailers
Recent findings from the German Property Federation (ZIA) and EY Real Estate paint an increasingly optimistic picture for shopping centres. In their report, "Shopping-Center 2024: Stocktaking and Future Viability of an Industry," the focus is on how a fresh mix of services and health-related offerings is bringing new life to these centers.
Iris Schöberl, vice-president of the ZIA, and in her day job the CEO of Munich-based Columbia Threadneedle, talks of a trend reversal in the shopping centre sector, with new creativity and professional management.
"During the coronavirus crisis, many shopping centres were involuntarily forced into passivity and experienced a nasty low. But that trend has been reversed and the upward trend is continuing at an accelerated pace."
If Schöberl's optimism is justified, it's good new for investors who've had little to lift their spirits in the embattled sector for several years.
While retail continues to play a key role in the centres (almost self-evidently), it's the added value of the "shopping-plus" brand, which attracts additional visitors to the malls and makes them a place for social encounters, that really makes them work and offer an alternative to the digital competition. "It's the mix that counts, says Schöberl.
Health and entertainment key drivers
Shopping centers now boast a broader range of services, with 89% incorporating health-related options. Entertainment facilities are in more than half (52%) of the centers, and food retailers are key players (75%).
And while visitor numbers haven't fully recovered post-pandemic, 86% of centres are becoming community hubs. Productivity in tenant spaces has increased in 75% of centres, showcasing adaptability in the face of challenges, says the report.
Despite pandemic setbacks, proactive revitalization efforts in 58% of centers, each with investments exceeding €3m, have yielded positive outcomes. Over 70% demonstrate strong performance in rental volume, vacancy, and new lettings.
The shopping center landscape in Germany is split, with almost half experiencing increased rental volume post-pandemic. Over 60% were fully leased or had low vacancy rates, indicating stability. Shopping centers are also embracing sustainability, with 77% certified, 94% using green electricity, and 86% offering e-charging points. Special family offers and collaborative spaces for social activities emphasize social sustainability.
ZIA Chairman Andreas Hohlmann: "With digital technology, a social touch, and a commitment to sustainability, shopping centers are heading towards the future at a remarkable pace, with retail remaining the centrepiece."
Opportunities for new investors
With financing conditions still so tight, more and more investors are putting shopping centres up for sale, despite the risk of deep losses, offering would-be investors a good opportunity to snap up flagship centres at levels significantly below what they sold for a decade ago.
Flagship centres such as the Hamburger Meile, with its distinctive 680 metre shopping promenade, and the Gropius-Passagen in Berlin are reportedly up for sale, with financing for both centres due to expire in 2024 and 2026. The Schönhauser Allee Arcaden in Berlin and the Westfield Centro Oberhausen owned by CPP Investments may also be put up for sale, according to those who track the market.
Real I.S.-majority owned Hamburger Meile is likely to sell for between €140 million and €150 million, market sources say. However, this would represent a significant drop in value, given that ECE and Unternehmensgruppe Bruhn sold the centre in 2011 for around €250 million. The fund owns 85% of the property, while ECE investors hold 15%. The operating agreement with ECE runs until 2036.
