Savills has identified three regions in Germany with potential for shopping centre development in sϋdlicher Oberrhein (including Freiburg), Mϋnster and Munich.
Savills has identified three regions in Germany with potential for shopping centre development in sϋdlicher Oberrhein (including Freiburg), Mϋnster and Munich. Taking into consideration purchasing power, the share of total retail space per person and the share of shopping centre space compared with sales in these three regions, Savills researchers have identified a potential shopping centre undersupply in these regions, making them ripe for investment.
Savills data shows that there is approximately 13 million sq m of shopping centre space in Germany. Currently Germany’s shopping centre density of approximately 159 sq m per 1,000 inhabitants is low compared to France (797 sq m), Spain (281 sq m), and The Netherlands (240 sq m). Savills believes the low shopping centre density in Germany is partly the result of planning restrictions but also the multiplicity of retail types, such as high street shops, competing for consumer spend.
Stephan Jung, Head of Retail at Savills Germany, says: “High street retail is still more important than shopping centres in Germany in terms of footfall, but overall there is a relatively low amount of shopping centre space per inhabitant. So one can talk of future potential for shopping centre development in Germany, in particular in the regions of sϋdlicher Oberrhein, Mϋnster and Munich.”
The firm’s data shows that there are currently 440 shopping centres in Germany, 40-50 are under construction and over 200 centres are in need of refurbishment. These unrefurbished centres, Savills argues, will provide investors significant value and add opportunities for asset management. Prime yields currently stand at 5.1% with secondary centres at 6.25%. Unrefurbished centres are traded around 7.75% depending of the financial injection that is needed.
Another driver for shopping centre development, Savills argues, is the planned expansion of retailers. Food retailer Rewe, food discounter Aldi, fashion discounter C&A and H&M, chemist’s chain dm, can be found in almost every shopping centre that will open over the coming two years. Some are targeting international chains such as Hollister when planning new shopping centres - the fashion retailer currently has 10 shops in Germany which are all located in shopping centres, and is planning to increase to 34 stores by 2015. Other fashion chains which are currently expanding are Inditex, H&M, Primark, Hollister, Bestseller, Calzedonia and Scotch & Soda.
Jung adds: “Central city centres have been rediscovered as favoured retail locations and inner city shopping centres comprise 43% of total schemes with as much as 60% of development over the past ten years in these locations. It is encouraging that retailers are committed to expanding and this should see more new developments.”