The serious consequences of the corona crisis and the increasing online trade for city centers can now be proven for the first time by figures from various institutes and associations. According to the Fraunhofer Institute IAO, the vacancy rate has clearly exceeded the critical mark of 20 percent in many cities and municipalities. Stationary fashion retailers have a particularly difficult time, according to the German Retail Association (HDE). Compared to 2019, the sales decline this year is expected to be 37 percent. And that’s not even the worst scenario. HDE managing director Stefan Genth added that he saw it as “critical” that the stationary fashion trade would ever again reach the pre-crisis level. There is “a clear shift in the consumption structure” – in fashion, but also elsewhere, clearly towards online.
This has far-reaching consequences for the value of retail properties and the level of rents, even in prime locations in large cities. So far, fashion has by far taken up the most space in the shopping malls. Large international chains have been a crowd puller for decades. But with the various lockdowns, which, according to Genth in Germany, were the longest in Europe, rents also fell. According to the real estate service provider CBRE, the top rents for new rentals and extensions in the sixth largest German cities at the end of 2020 were around 20 percent below the level at the end of 2019. Frank Emmerich, Head of Retail at CBRE Germany, says that new leases are now roughly the same as the rental price from 2010 lying. He expects the level to stabilize this year.
Now the grocers are attractive
As a result of the pandemic, international fashion chains have largely become obsolete as stable anchor tenants in shopping centers. Investors are already reorienting themselves. “The trend in mixed-use commercial real estate is clearly towards those with grocery stores,” says Niclas Karoff, CEO of Hamborner Reit, a commercial real estate specialist in Duisburg. “Because with these, the customer frequency also increases.”
Instead of chains like Primark or H&M, it can be concluded that investors are looking for real estate with a grocery store like Aldi or Rewe. This will not only change shopping centers and malls, but also the character of inner cities in the long term. Of course, in the opinion of the experts, monoculture fashion will not be replaced by monoculture food. For one thing, people’s hunger is not infinite, and supermarkets’ ability to expand is also limited, as leases typically last for around ten years, which is slowing change.
But almost all experts assume that today’s areas will be used more and more frequently by so-called non-food retailers as hotels, offices, co-working spaces, restaurants or for sports and games. The Fraunhofer Institute sees this change as an opportunity rather than a danger. “Consumption will decline in a positive sense,” says Claudius Schaufler, Head of Smart Urban Environments, “there will be much more than just retail. A much larger range that goes far beyond consumption.” The prerequisite is that the cities deal more flexibly with space. Because digitization is advancing much faster than the city centers are changing.
Fashion retailers suffer the most.
(Photo: Blufoto / imago images / Independent Photo A)
Stefan Müller-Schleipen, the co-initiator of the initiative Die Stadtretter, predicts that ten-year leases will no longer be concluded in the long term. They would run counter to the desired flexibility in the centers. He advocates a kind of “surface tinder”, an online platform where people who want to commit for a certain period of life can come together – just like on the mobile dating app.
It doesn’t necessarily have to be bad for retail sales. In the first Corona year 2020, the entire industry recorded a surprising plus of 5.7 percent. Grocery retailers in particular took in a lot because they also sold other things than groceries while the other stores had to close. Sales also rose because the hardware stores were able to look forward to a newly discovered desire for DIY enthusiasts in the home office. And because online trading was booming.
Small cities have it easier than big ones
This year, despite all the adversities, the HDE is also expecting growth in the first half of the year, this time by at least 1.5 percent. However, the sales are distributed very differently. In the current collective bargaining negotiations with Verdi, the HDE therefore wants this differentiation to be taken into account. The union rejects this.
Incidentally, Genth is convinced that small and medium-sized cities will find it easier to leave the difficult times of the pandemic behind. More difficult than big cities, because they will continue to suffer from the fact that, for example, tourists from abroad will stay away for the time being. The shopping streets in metropolises such as Berlin and Munich are particularly affected by this. The HDE boss was cautiously optimistic, but also said: “The corona crisis is far from over for the retail sector.”
Not to mention the continuing growth in online retail, which various studies are also forecasting for the coming years – and which city centers will also have to adjust to.