Holding a central geographical location within Europe, the Federal Republic of Germany is one of the world’s strongest national economies, and with 81.1 million consumers the largest single market in the European Union.
The country has flourished during the age of globalized economy and has an undeniable impact on the global economy. This industrialized, modernized country is one of the world’s top exporters. The retail market in Germany is mature and city centres remain popular. Though German consumers are very brand aware, they are also very price conscious, more so perhaps than anywhere else in Europe. There is increasing representation of international retailers, though it is a competitive market to enter if the nuances of the consumer are not fully appreciated.
|Unemployment rate (%)||5.0||4.8||4.6||4.6||4.6|
|Interest rates 10-year (%)||0.5||1.0||1.6||2.1||2.4|
Note: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc. July 2015
|Population||81.1 million (2014)|
|GDP||EUR € 2916 billion (2014)|
|Public sector balance||0.5% of GDP (2015)|
|Parliament||Coalition between CDU/CSU and SPD|
|Election date||2017 (Presidential & Legislative) 2017 (Legislative)|
|RETAIL SALES GROWTH: % CHANGE ON PREVIOUS YEAR|
Source: Oxford Economics Ltd. and German Federal Bank
MAJOR DOMESTIC FOOD RETAILERS
Edeka Group, Rewe Group, Schwarz Group, Metro Group, Aldi Group, Lekkerland, Tengelmann Group
MAJOR DOMESTIC non-FOOD RETAILERS
Otto Group, Karstadt, Kaufhof, Peek & Cloppenburg, Tchibo, Ernsting’s Family, Esprit, Takko, New Yorker, s.Oliver, Breuninger
INTERNATIONAL RETAILERS IN Germany(a selection)
H&M, IKEA, Primark, TK Maxx, Inditex Group (e.g. Zara, Massimo Dutti), Abercrombie & Fitch
FOOD & BEVERAGE OPERATORS
McDonald’s Deutschland (McDonald’s, McCafé), Burger King, Nordsee, SSP Deutschland (Railwaystation Gastro/Retail), YUM!Restaurants (Pizza Hut, KFC), Aral (Petit Bistro), Subway, Autobahn Tank und Rast
|MONDAY - FRIDAY||SATURDAY||SUNDAY|
|00.00 - 24.00*||00.00 - 20.00/24.00*||Regularly closed, with exceptions|
|*In federal states: Baden-Wurttemberg, Berlin, Brandenburg, Bremen, Hamburg, Hesse, Mecklenburg Western Pomerania, Lower Saxony, North Rhine-Westphalia, Saxony-Anhalt, Schleswig Holstein, Thuringia Other federal states: 06.00 - 20.00/22.00|
Germany’s retail market, with a potential of some 81.1 million customers combined with its overall stability in terms of retail turnover, is a strong draw for national and international retailers. The sheer size of the market in combination with a comparatively high purchasing power puts Germany on top of their expansion agenda.
In July 2015 total stock of shopping centre space amounted to 14.54 million sqm in 590 schemes. Shopping centre provision per thousand inhabitants is accordingly at 179.6 sqm and thus way below the 2014 EU-27-average of 268.7 sqm per thousand inhabitants. Nevertheless, Germany’s shopping centre market is one of the most developed in Europe. Until the recent past, shopping centres were generally located in decentralized locations, though developers and investors have recently turned their focus on center refurbishments and extensions, the majority located in CBDs. This trend is partly a result of the difficulty in obtaining building permission for new projects in peripheral locations, but also a response to the rise in attractiveness in the country’s high streets.
According to statista, e-commerce compromises some 10% of total retail sales and recorded a turnover at some €43 billion in 2014. E-commerce in Germany has risen rapidly in recent years and, according to Hauptverband Deutscher Einzelhandel (HDE) communication via Social Media, will increase significantly in the future.
As German planning law is very restrictive in terms of building permits for new retail premises, and as German cities try to protect their CBDs, supply of prime high street retail space has remained relatively short. Demand from national and international retailers trying to introduce and expand new retail concepts in Germany has always been high. Accordingly, retail rents held stable through 2008 and actually rose in 2009. The trend of rising rents in Germany’s top locations has not changed since and continues well into 2015.
The stability of the German retail market attracts national as well as international investors. The first half of 2015 was another strong first half in the retail investment market. Some € 9.4 billion was invested, a rise of 85% in comparison to the previous year-period. This half-year investment sum already exceeds the respective annual total of the past three years.
On average, the highest investment transaction sums are generated in the Shopping Centre segment. However, in H1 2015, for the first time in years, high street investment held the largest combined sum with € 3.46 billion in total, which equates to a market share of 37 %. In 2015 the largest transaction by far was the € 2.4 billion purchase of 43 Kaufhof department stores throughout Germany. Following a long way behind was the € 770 million for a bundle of 4 shopping centers and the € 650 million achieved for the 46.1% share of Mfi-Shoppingcenter . The largest transaction in 2014 was the acquisition of a 50% share of the CentrO Oberhausen at € 535 million, followed by the purchase of Christie-Portfolio with a total asset volume of € 400 million.
NEW ENTRANTS TO THE MARKET
|Denham||JD Sports||Lululemon||Clas Ohlsen||Reserved|
|TOP SHOPPING CENTERS BY SIZE|
|NAME||CITY||SIZE (GLA SQM)||YEAR OPENED|
|Nordwest Zentrum||Frankfurt am Main||106,000||1968|
|Mall of Berlin||Berlin||76,000||2014|
|KEY FEATURES OF LEASE|
|Lease Terms||Retail: 10 years (5+5) with options. 10 year lease is common, however 5+5 years negotiable. Break options are unusual, however anchor tenants in shopping centres get break options. There is no statutory right of renewal unless it has been agreed in lease contract.|
|Rental Payment||Rents are paid monthly in advance. Turnover rents are usually not found on the high street, but do exist in most shopping centre schemes and retail parks. Tenants pay a monthly minimum rent. Sales turnover rent is calculated at the end of the year. Minimum rent is deducted as prepayment. Key money is sometimes paid for stores in premium high-street locations, although not official.|
|Rent Review||Indexation clauses in leases of 10 years or more (including break options) include automatic adjustment on a given date or whenever the official consumer prices index ("Verbraucherpreisindex") increases by predetermined amount (decreases are not usually considered). Rent may be adjusted as the inflation index changes.|
|Service Charges, Repairs and Insurance||Service charge is always charged in addition to the base rent. Utilities included in the service charge. The basic principle of German law is that maintenance and repair of the property is the responsibility of the landlord. However, he can include provisions in the rent agreement transferring a large proportion of the internal maintenance obligations to the tenant. This is common practice in German commercial leases. Even so, certain key maintenance tasks always remain the responsibility of the landlord. These include maintenance of the roof, the structural components of the building, the outside walls and the supporting inside walls. Tenant: a proportion of internal repairs and maintenance depend on lease contract. Landlord. Tenant has liability for his business, glass insurance.|
|Property Taxes and other costs||Local property tax “Grundsteuer” is based on the value of the property. The tenant usually pays this through service charge and it is usually a negligible amount. VAT of 19% (current) is payable on rent.|
|Disposal of a Lease||Assignment of the lease is permitted subject to the landlord’s consent. Early termination can be negotiated. The tenant is normally responsible for reinstating the premises, although this is negotiable.|
|Valuation Methods||There is no mandatory measurement code at present. Usually gross lettable area (GLA) is used. The existing DIN 277 mainly applies to residential property. Properties are valued by use of overall rates per sq.m.|
|Legislation||BGB (Civil Code) / MietG (Rental Law; part of BGB). Leases are legally binding according to German General Law (“BGB”).|
Mark BarrettHead of EMEA Cross Border Retail & Leisure Agency
Direct: +44 (0)20 7152 5163
Office: +44 (0)20 7152 5000
Mobile: +44 (0)7793 808 163
43/45 Portman Square