Retail Market Overview Germany

H2 2022

Retail letting market with constant result

February 13, 2023
Retail rental market remains on a stable course

The retail rental market remained stable in the second half of 2022. The first two quarters of the year saw the highest take-ups with around 109,000 sqm each, but the second half of the year was only slightly weaker. The feared downturn on the retail rental market due to the economic situation did not materialise. The combined take-up of 421,000 sqm in a total of 914 deals in 2022 was just 3% below the previous year’s performance but 9% above the pandemic year of 2020. This was also due to strong demand from international retailers, which concluded 252 deals in the second half of 2022 alone. The international tenants included the Swedish fashion label Axel Arigato, the Danish fashion retailer Ganni and the cult eyewear brand Ray-Ban with a flagship store.

According to the current consumer barometer published by the HDE (German Retail Association) at the beginning of the year, there is still a slight upswing in consumer sentiment, not least because of the recent more optimistic economic forecasts. The propensity to make acquisitions appears to be stabilising and consumers’ income expectations are easing marginally. Despite this upward trend, consumer reluctance to buy remains high, partly in view of the continually high energy costs and the expected heating cost back payments.

The most recent calculations by the Federal Statistical Office show that the inflation rate is expected to fall in the early part of the year, thanks to the effects of the electricity and gas price brake, and it is also expected that salaries and wages will rise by an average of 5%. A significant upswing in private consumption is expected from the second quarter of 2023 onwards.

Big 10 repeat their previous year’s performance

With a total of 404 letting deals involving 152,500 sqm, the Big 10 cities confirmed their attractiveness for retailers. Half the cities improved on their previous year’s performance. These included Berlin (42,800 sqm), which lies in undisputed first place. Over 70% of lettings were to international tenants. The take-up in the federal capital was even better than in the pre-COVID period. In second place was Hamburg with 20,300 sqm, which is only slightly below the previous year’s performance, but along with Berlin, Hamburg was the only city to register a consistent letting take-up of more than 20,000 sqm over the last three years. Cologne (18,900 sqm) completed the top three. The good performance here was due above all to the fashion sector with around half of all lettings. Also worth mentioning is Leipzig (11,700 sqm), which recovered after two weak letting years with a performance bolstered by lettings to the food retail sector. The cities registering a weaker performance year-on-year included Düsseldorf, Frankfurt, Hanover and Stuttgart. Nonetheless, there is now an upward trend amongst the Big 10 cities: their share of 36% of total letting volume is 4% points above the pre-pandemic level.

Fashion sector leads the way again

After the restaurant/food segment nosed ahead with shares of 30% and 29% of total take-up by sector in 2020 and 2021 respectively, the tide turned at the beginning of 2022. The fashion sector was the most active in terms of space take-up. With a share of 33%, the segment was significantly ahead of the restaurant/food sector. Around two thirds of its take-up was attributable to young fashion retailers and clothing department stores. The most expansive retailer was the Bestseller group, with its Only, Vero Moda and Jack&Jones labels, which leased 10 new stores. For the clothing stores, in addition to the fashion department store “Aachener” which has recently expressed interest in “Galeria” locations for a new store concept, the Sinn group was active. There was also strong demand from the exclusive fashion segment with 25 new leases and around 8,000 sqm, through which the luxury label segment doubled its share compared to 2021.

The restaurant/ food segment only managed 26% because classic food retailers in particular reduced their letting activities to 20% below their previous year’s level. Food delivery services, which experienced a boom during the pandemic, played only a subordinate role during the year. With the takeover of Gorillas by its Turkish competitor Getir, the signs no longer point to expansion in this segment, but rather to the long-awaited consolidation of a fiercely competitive market.

The health/beauty sector is a permanent fixture in the top three with 9% of take-up, down 1% point compared to the same period the previous year. Around half of the turnover was attributable to the drugstore chains dm, Müller and Rossmann. The other sectors under review achieved almost entirely similar figures to 2021, with only the sports/outdoor segment down, in this case to only 2%: a fall of 6% points. There was a particular lack of large-scale deals in the latter segment, with only three of the 23 lettings for areas larger than 1,000 sqm, including the largest NBA and Fanatics store in Europe which opened in Berlin.


Availabilty rate shows no relaxation yet

The JLL availability rate remained at high in terms of available space in the second half of 2022 and reached 17%, its highest level since the rate was first recorded in 2018. The further closures of Galeria department stores that had been announced have already taken place and contributed to the rate increasing by a further 1.4% points compared to the first half of 2022.

In terms of availability by number of stores, there are signs of a slight easing. After the outbreak of the pandemic, the rate rose to a peak of 15.6% before levelling off to its current level of 14.7%.

Of the 336 retail stores available, the fashion sector accounts for the largest share, with 107 units. It is both the principal provider and the No. 1 absorber of shop units. The restaurant/food and shoes/ leather goods sectors follow at some distance with 28 available stores each.

Amongst the Big 9 locations under review, Munich achieved the lowest rate in terms of the number of available shops with 8.7%. In terms of space availability, Cologne performed best with 8.4% and is therefore in a better position than before the pandemic (9.1%).

Prime retail rents continue to fall

Prime rents across Germany fell by an average of 2.3% compared to the end of 2021. For the individual population categories, cities in the 250,000 - 500,000 category saw the greatest decline in rental prices of 4.5%, with major cities with populations of over 500,000 also losing 2.6%. The population category 100,000 - 250,000 was the most stable with a marginal downturn of 0.5%, but rents here had already been under pressure from before the pandemic. For the Big 10, top rents remained consistent in five of the cities. Prime rents continued to fall by between 2% and 7% in Berlin, Frankfurt, Cologne, Nuremberg and Stuttgart. For 2023, rents are expected to remain stable over the first half of the year. The high electricity and heating costs are placing an additional burden on retailers.

With the increase in the base interest rate by the ECB, and the rise in interest rates and financing costs generally, investors are facing additional challenges when buying real estate. Prime yields for mixed use retail and commercial properties in high street locations consequently rose by 30 basis points year-on-year in seven of the Big 10 locations. In the three smaller cities of Leipzig, Nuremberg and Hanover, yields initially remained stable but were already at a higher level previously.

Contact us

Our Retail Markets contacts:

Retail Leasing:
Dirk Wichner, Head of Retail Leasing Germany

Retail Investment:
Sarah Hoffmann, Head of Retail Investment Germany

Retail Tenant Representation:
Josefine Ulrich, Director Retail Tenant Representation

Helge Scheunemann, Head of Research Germany


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