Retail Market Overview Germany

H1 2023

Resilience evident in the retail rental market

July 31, 2023
Letting take-up is stable

Germany’s retail letting market managed to hold its own in the first half of 2023 despite the continuing tense macroeconomic conditions. With a letting take-up of 213,000 sqm and 414 leases signed, it remained true to its steady course over the last six quarters. The number of deals concluded over the period did not match the first-half year result in 2022 (470); nevertheless, letting take-up fell just 2.0% short of the previous year's level. This was mainly due to lettings of units larger than 2,000 sqm. Such units accounted for 38% of total letting take-up in the first half of 2023, up from around 25% last year. The large-volume lettings were secured mainly by the textiles segment (51,000 sqm), with the strongest demand coming from clothing stores and young fashion suppliers.

The recent positive consumer sentiment weakened again in July 2023, due in part to the continued high inflation rate of 6.4% which is impacting on households’ purchasing power. Specifically, the disproportionate increase in food prices (+13.7%) and ongoing discussions on heating regulations are contributing to consumers' reluctance to spend. According to the German Retail Association (HDE), online retail also suffered for the first time last year, falling to €84.5 billion. After posting significant growth of €26 billion in the pandemic years 2020 and 2021, online retail declined by 2.5% due to poor consumer sentiment.

Big 10 still in demand 

The Big 10 continued their upward trend from the first quarter of 2023, posting a result of 106,500 sqm for the entire first half-year, around 22% above last year's result and 50% of the total take-up volume for the country as a whole. Despite the good result, the performance of four of the major cities in this group was disappointing when compared to last year. Hamburg (30,400 sqm) assumed first place this time, just ahead of Berlin (29,500 sqm). The city’s good result is partly due to the development of the new “Überseequartier” and the numerous lettings concluded there. Berlin’s performance has also benefitted from the “Am Tacheles project”, where the first retail tenants have already moved into their new units. Stuttgart (9,500 sqm) completes the leading trio but at some distance behind, with the city getting off to a good start in the new year following a rather weak letting year in 2022 by securing a number of lettings in and around Königstrasse. Frankfurt, Düsseldorf and Cologne formed the midfield with solid results of between 7,000 sqm and 9,000 sqm, with most lettings focused on units in the smaller and medium size categories. Leipzig and Munich joined Hanover and Nuremberg in the bottom group, with both unable to match their results from last year due to the relatively restrained demand for space.

Textiles segment further extends its lead

Similar to the full-year 2022, the textiles segment remains clearly ahead in terms of branch take-up this year, achieving one of its best results of the past ten years with a share of 46%. Three quarters of the space leased by the textiles segment was accounted for by clothing stores and young fashion retailers. The frontrunner is the strongly expanding Aachener fashion store with three lettings; here, the takeover of two Galeria units made a particular impact. Among the young fashion retailers, Bestseller Group's Only label remains the leader of the pack with seven lettings, but Inditex Group also rented space for Zara, Bershka, Pull & Bear and (for the first time in Germany) its Stradivarius brand.  The share of the second-placed restaurant & food segment continued its decline, reaching 23% and its weakest result of the past four years. Although there is still demand for restaurant space and new international system caterers such as the Big Easy seafood chain and the French Big Mama Group continue to penetrate the German market, lettings by this market segment have tended to involve units in the small to medium size categories. Around half of the take-up was attributable to the food sub-segment, with the Go Asia chain being particularly active with five lettings.

Health & beauty remained the third strongest segment with 8.0%, losing just one percentage point compared to the first half of 2022. Traditional drugstores were reluctant to rent. The fitness segment, including Easyfitness fitness studios, continued to expand. The other segments surveyed registered unchanged shares of between 1.0% and 4.0% with only slight deviations from the same half of last year.

Space availability increases once again

Unsurprisingly, there was another rise in the JLL Availability Rate in the first half of 2023. Triggered by the renewed wave of Galeria department store closures, space availability for the Big 9 reached a new high of 19.7%, 2.7 percentage points above the figure recorded for the second half of 2022. The increase in availability in terms of number of shops was more moderate at 15.5%, 0.7 percentage points above the previous half-year.

 Within the Big 9 locations surveyed, Munich continued to register the lowest space availability by the number of available shops at 9.5%. Leipzig had the best space availability at 9.9%. In 2019, Saxony's capital experienced the closure of its Karstadt department store, but the store has since been successfully converted into a multifunctional office and commercial building (N30/NEO) with around 10,000 sqm of retail and restaurant space, causing the space availability rate to drop from 20.3% to its current level.

The space availability rate is expected to remain stable in the second half of 2023, provided that no further large-scale department store closures occur. Some concepts have been developed for the re-utilisation of surplus department store space; these envisage space reduction and repositioning or alternative uses such as municipal, office or storage space.

No stabilisation of prime retail rents

Further rent reductions were observed in prime retail rents across all population size categories. In the Big 10, the lowest annual decline in prime rents was recorded at 2.1%. Prime rents remained unchanged in four of the cities including Leipzig, Nuremberg, Munich and Stuttgart. For the other six cities, the reductions were between 2.0% and 4.0%. Locations with fewer than 100,000 inhabitants and cities with 250,000 - 500,000 inhabitants suffered the highest average losses of around 6.0%. Of the 66 cities surveyed, the 100,000 - 250,000 population size category represented the German average, with an average decrease of 4.1%. Unchanged rents (year-on-year) were recorded in 21 locations outside the Big 10 including in Freiburg, Dresden and Münster.

Similar to all other real estate segments, yields on high-street retail properties are expected to continue to rise; yields in the Big 10 rose by an average of 30 basis points in the first half of 2023. Munich currently has the lowest yield of 3.2%, while the highest yield of 4.25% is achieved in Hanover and Leipzig. Similar levels were last recorded in 2014. The ECB's interest rate policy, which is difficult to assess, and weakening property prices are also leading to restrained investor demand in this segment.

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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