Real estate in Germany – Increasing pressure for change in the German retail sector
The situation is getting tougher due to the Corona pandemic and growth in e-commerce.
A press conference was recently held with some industry heavyweights (held, appropriately for the times, online) to discuss the binding change and modernization of retail, shopping centers and department stores, if they are going to survive – and hopefully thrive – in the future. There are considerable challenges before it becomes a reality. A bright light exists in the field – it is the retail field anchored in the groceries sector and mixed-purpose real estate trade with a focus on food, where demand will continue to grow, as confirmed by the participants.
One participant summed up the situation as follows: “The emergence of the Coronavirus requires a differentiated assessment, in the field of retail more than in real estate of any other kind. On the one hand, retail revenue recorded annual growth of 8.2% in October, according to the Federal Bureau of Statistics, with sales of furniture, household appliances and building materials increasing by 14.2%. On the other hand, the apparel industry alone suffered 29% revenue losses during the first six months of 2020 compared to the second half of 2019. “
Another participant was direct about the growing pressure in the industry to act to prevent a disaster. “We assume that a large number of retail properties in larger-scale locations in Germany are under tremendous pressure for change or conversion. Therefore, in the coming years we will see a large number of retail locations that have moved to alternative or new uses – a process that also promises huge opportunities. For example, in department stores and commercial buildings or shopping centers, and this can be an opening for new types of use and a variety of new small-scale real estate products to return to inner cities. Forms that come to mind include housing, micro-logistics, healthcare, services, offices, and public uses, but also innovative and gastronomic retail concepts. Retail will remain a basic component in inner cities. “
He added: “Overall, retail real estate as a property market will become more demanding and complex, a fact that is reflected in the significantly increased demands from the issues that investors, owners, tenants and municipalities bring to the table when discussing properties and how to use them.”