Austria

AustriaAustria is an affluent market enjoying close proximity and extremely good accessibility to a number of other large markets. With its central location in Europe, it acts as a gateway between Western and Eastern Europe, even more so since the eastward enlargement of the European Union.

Austria has a population of around 8 million. The Alps dominate the landscape. More than two-thirds of the country is mountainous, which means that most of the population is concentrated in the country’s towns and cities. Tourism plays an extremely important economic role in Austria. In 2014 around 25,3 million foreign visitors came to Austria, with around 131,9 million overnight stays.

The Austrian retail market continues to be highly contested due to the rising price sensitivity of the Austrians, which has a positive effect for companies of the discount-sector. The grocery sector (as well as companies like Spar and Merkur) increased their private label product range significantly. In the first half of 2015 the retail sector in Austria achieved a sales growth of 1.2 % compared to previous year. The toy sector achieved the highest turnover increase (+ 3.4 %) followed by the grocery sector (+ 3.2%). The electronic goods sector’s turnover decreased the most (-2.7 %) followed by the shoes sector (-1.3 %). E-commerce continues to gain importance in terms of sales in the retail sector. In 2014 E-commerce sales figures increased in Austria by 7 % up to EUR 200 million – this represents approx. 5 % of the total retail-volume.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*2014E2015F2016F2017F2018F
GDP growth 0.30.71.51.81.8
Private Consumption Growth 0.20.71.31.51.4
Industrial production -0.12.12.42.22.2
Investment 0.40.04.11.91.6
Unemployment rate (%) 5.65.65.65.04.8
Inflation 1.71.11.61.91.8
US$/€ (average) 1.31.11.11.11.1
Interest rates Short Term (%) 0.10.00.00.00.0
Interest rates 10-year (%) 0.71.11.92.12.4

NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc

ECONOMIC BREAKDOWN
Population 8.5 million (2014)
GDPUS$437.4 billion (2014)
Public sector balance -2.4% of GDP (2014)
Public sector debt84.5% of GDP (2014)
Current account balance0.8% of GDP (2014)
Parliament The centrist ‘grand coalition’ of SPÖ and ÖVP
Head of State President Dr. Heinz Fischer
Prime Minister
Election dates
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
AUSTRIA20102011201220132014F
Retail Volume2.71.21.11.00.4
Retail Value1.2-1.7-1.0-0.9-0.5

Source: kmuforschung.ac.at

LARGEST CITIES (2015)
CITYPOPULATION
Vienna1,797,337
Graz274,207
Linz197,427
Salzburg148,420
Innsbruck126,965
Klagenfurt97,880
Villach60,500
Wels59,858
Sankt Pölten52,747
Source: Statistik Austria, Volkszählungsergebnisse, RZ2011, Statistik der Standesfälle, Datenbank POPREG

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Vienna: 48.208174, 16.373819
Graz: 47.070714, 15.439504
Linz: 48.306940, 14.285830
Salzburg: 47.809490, 13.055010
Innsbruck: 47.269212, 11.404102
Klagenfurt: 46.627940, 14.308990
Sankt Pölten: 48.203530, 15.638170

MAJOR DOMESTIC FOOD RETAILERS

Spar (Interspar, Eurospar, Spar Gourmet), Rewe Group Austria (Merkur, Billa, Adeg, Penny), Pfeiffer Handelsgruppe (Zielpunkt, Unimarkt)

MAJOR INTERNATIONAL FOOD RETAILERS

Lidl, Hofer, Denn’s Biomarkt

MAJOR DOMESTIC non-FOOD RETAILERS

MTH Retail Group (Libro, Pagro), Leder & Schuh AG (Corti, Dominici, Humanic, Jello, Shoe 4 You, Stiefelkönig), Intersport, Bipa, DM, Elektro Haas, Palmers AG, Magda Rose KG (Jones), Kleider Bauer, Huber Shop, Wolford, XXXLutz, Steinhoff Group (Kika, Leiner), Bauhaus, Intersport Eybl, Lutz, Interio.

INTERNATIONAL RETAILERS in Austria

Primark, Hunkemöller, Ikea, Inditex Group (Zara, Bershka, Pull and Bear, Massimo Dutti), Mango, H&M, Peek & Cloppenburg, Media-Saturn-Group (Saturn, Media Markt), Müller Drogerie, Hornbach, OBI, Kik, Benetton, C&A, Hollister, Superdry, Desigual, Tommy Hilfiger, Varner Group (Dressmann, Bik Bok, Carlings).

Food & Beverage Operators

Starbucks, Coffee Day, Mc Donalds, Burger King, KFC, Backwerk, Wein & Co, Ströck, Bäckerei – der Mann, Dunkin Donuts, Nordsee, Subway, Radatz, Tauber, Cinnabon, Vapiano, L‘Osteria, 3 Goldene Kugeln.

TYPICAL HOURS
MONDAY - FRIDAYSATURDAYSUNDAY
09.00-19.0009.00-18.00Closed

Retailing is a relatively fragmented industry in Austria, although it has shown a trend towards greater concentration. Austria has among the highest levels of concentration in Europe within the grocery market, when measured in terms of market share. The three leading retail chains (Rewe, Spar and Hofer) dominate grocery retailing, while XXX-Lutz, Bauhaus and Media Saturn are the leading companies within non-grocery retailing. There are many international retailers in Austria which have entered directly.
The most relevant shopping streets in Austria are located in Vienna (Mariahilferstrasse, Kärntnerstrasse, Kohlmarkt, Golden Quarter), Graz (Herrengasse), Linz (highway) and Salzburg (old town). In addition, shopping malls and retail parks dominate the Austrian retail market.

In 2014 the 229 shopping centers generated an annual turnover amounting to EUR 12 billion with a GLA of approx. 3,8 Mio. sqm. This represents an increase of more than 2.5 % compared to previous year. Shopping malls delivered a turnover of EUR 3,450/sqm and retail parks EUR 2,400/sqm. There are approx. 100 retail parks located in Austria.
Due to the very restrictive planning policy and the lack of available good locations, the number of new shopping mall projects will decrease in the future.

Towards the end of 2014, ECE opened a new shopping mall in Vienna located at the central railway station. A final project evaluation is possible as soon as the station is in full operation and the surrounding areas have been completed.

In August 2015 SES opened the new shopping mall “Weber Zeile” in Ried (Upper Austria). The extension of “Fischer Park” with anchor tenants like Peek & Cloppenburg and ZARA opened in October 2015. The re-opening of the refurbished “Huma Center” in Vienna (Simmering) is planned for spring 2016. The opening of the extension of “Plus City” (Linz) is planned for 2016.

Mc Arthur Glen operates two Designer-Outlets – FOC-Parndorf (nearby Vienna) and FOC-Salzburg. In the area of Parndorf further extensions of other operators are expected.

It is possible to enter the Austrian retail market direct, though many also franchise and enter via concessions/shop-in-shops.
Foreign Companies need to be registered in the ‘Handelsregister’, the Austrian registry of companies to run a commercial enterprise here to avoid tax deficits; buying or renting property in Austria is generally not a problem. Landlords may insist on a registered tenant to ensure against loss of rent.

The Austrian lease structure in retail is more landlord than tenant friendly. Although it is possible to occupy a new building within a few weeks, it is more realistic to expect that on average it will take 9-12 months from initiating the property search to taking occupation of an existing property. This includes time for considering location options, the identification of buildings or sites, negotiating leasehold or freehold terms and drafting of the appropriate legal documentation. In principle the search for suitable shops in city center locations takes about 1-2 years. In shopping centers it can go faster. The duration for finding a shop depends on the concept and the price.

New Entrants to the Market

DressmannMy ShoesZARA HomeBik BokTK Maxx
H&M Home CarlingsGAPCubusTiger


TOP SHOPPING CENTERS BY SIZE
NAMECITYSIZE (GLA SQM) YEAR OPENED
SCSVösendorf225.8001976
DonauzentrumWien133.0001975
Shopping City SeiersbergSeiersberg/Graz85.0002003
Plus CityPasching/Linz70.0001989
DEZInnsbruck65.0001970
G3 ShoppingGerasdorf65.0002013
Center HaidHaid54.9001991
EuroparkSalzburg50.7001977

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsLeases are typically for 10 years, in Shopping centres for 5 years with an option for prolongation of 5 + 5 years; break options after 5 years are common practice especially for lease contracts in shopping centres where anchor tenants get the right for earlier termination. Break options or earlier termination can trigger a penalty and should be defined in the lease contract. In the absence of a clear agreement in the lease, the tenant has no legal right to break so long as the landlord fulfils his obligations. Where agreed, breaks are typically at the first rent review.
Rental PaymentRents are typically payable monthly in advance. Turnover/percentage rents are increasingly seen in shopping centres and common in specialist sectors such as factory outlets, hotels and airports. A security deposit (3 months gross rents) is normally required also for a tenant with a strong covenant or where a parent company guarantee (or less frequently a bank guarantee) is provided. For weaker covenants, a deposit of 6 months rent equivalent is common place. Premium payments are common place in the retail market (although it is not official – usually named rent-prepayment) at times of rising rents and limited supply, with values boosted by the 2-5 year review pattern of rents. Turnover rents from 6-10 % of annual turnover for retail, up to 15 % for restaurants.
Rent ReviewRent may be adjusted annually as the inflation index changes. Indexation is common practice; Indexation clauses in leases of 5 years or more (including break options) include automatic adjustment on a given date or whenever the official consumer prices index (VPI-Verbraucherpreisindex) changes by predetermined amount. Rent adjustment by Indexation can also be negotiated and is part of the lease contract.
Service Charges, Repairs and Insurance A service charge is usually payable in multi-tenanted buildings and covers management fees, security, cleaning, landscaping, internal maintenance of common parts, external maintenance and insurance, servicing of elevators, water, heating, air conditioning, management fees and property taxes. It excludes internal maintenance and insurance of rented accommodation, utility charges and VAT. The landlord is responsible for external /structural matters in shopping centres (charged back via service charge) or tenant (except in multi-let buildings). The tenant is responsible for internal matters. The landlord usually insures the main structure and external fabric but will charge this back to the tenant. Insurance for common parts is also paid by the landlord and charged back. The tenant usually pays for internal insurance directly.
Property Taxes and other costs Local Property Tax ‘Grundsteuer’ is based on the value of the property. The tenant usually pays this tax through Service Charges and it is usually a negligible amount – 2-3,5 % of the rent. Tax for lease contract: practiced only in Austria; A written lease agreement triggers stamp duty of 1% of the rent over the whole term of the lease (max 18 years) or over the three years' rent (in case of a lease for an indefinite term). Rent is further subject to VAT, 20% for lease agreements concerning businesses and 10% for private leases. Deposit: 3 – 6 months gross rents VAT: 20%
Disposal of a LeasePermitted subject to the landlord’s consent. Sub-letting is usually possible under the terms of the lease, subject to landlord’s approval. Assignment rights are not normally barred in the lease but will also be subject to consent – which should not be unreasonably withheld. Early termination is only by break clause – to be negotiated at outset of lease by mutual consent upon negotiation. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear and tear. All tenant improvements must be approved by the landlord subject to the alteration covenant in the lease and the fact that approval should not be unreasonably withheld.
Valuation MethodsShops (high street) are valued on a 'zoning' basis. The retail zoning principle is applied on the different quality of the sales floors; recognises that the ground floor area which is valued with 100 % rent per square meter (sqm); First floor and additional floors minus 20-30% of rent / sqm, Basements – depending on accessibility, ceiling hight and lightening minus 30 – 50% of rent value of ground floor. On the same floor the valuation differs between the actual net sales area and the ancillary area - a flat rent will be applied on total GLA. In prime shopping Centres the floor structure is no more applied as – due to refurbishment and optimised tenant mix – it is assumed the floors to offer same quality and footfall.
LegislationGeneral: In principle, lease agreements for both residential and business purposes are governed by the Austrian Tenancy Act ("MRG", Mietrechtsgesetz) - which depending on the type of premises is applicable in full, partly (e.g.for business parks) or not at all - and by the Austrian Civil Code ("ABGB", Allgemeines Bürgerliches Gesetzbuch). If the MRG is not applicable, only the respective provisions of the ABGB apply. The MRG is highly restrictive and mainly intends to protect the tenant's interests. Thus, most of its provisions (e.g. restrictions on early termination, maximum rent) are mandatory and cannot be waived or modified to the tenant's disadvantage.


Austria Contacts

Mag. Gerald Heinisch

Head of Retail
bareal Immobilientreuhand GmbH
Donau-City-Straße 1
A-1220 Wien 
M: +43 664 / 511 72 28
F: +43 1 / 205 216-36