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Retail market

Construction/gardening/leisure as crisis winners

189 €/qm NF

Peak rent 1/2021

29.10 Mrd. Euro

Demand volume 2020

104,4

Centrality index

Demand volume

The demand volume in the stationary retail trade in the Metropole Ruhr amounted to approx. 29.2 billion euros last year and was thus approx. 1.4 % or 410 million euros higher than in 2019. Due to the pandemic, there were in part quite significant shifts in the individual main product groups.

Goods for daily use accounted for 57.4 % or 16.7 billion euros (2019: 54.2 % 15.5 billion euros). Decisive factors for the marked increase compared to 2019 included the expansion of home office arrangements with predominantly domestic lunch supplies as well as the closure or shortened opening hours of gastronomy. In addition, higher-value products also found their way into consumers' shopping carts.

The Corona crisis also had a positive impact on the construction/gardening/leisure product group. Its share rose to 12.3% or EUR 3.57 billion (2019: 10.8% or EUR 3.1 billion). Due to the travel restrictions and travel bans, the holiday money saved was invested in the home four walls or the garden in many places. The development of this product group was given an additional boost by the high demand for bicycles and e-bikes, which became the means of transport of the moment.

The biggest loser in the Corona pandemic was stationary fashion retail, whose share of demand volume fell to 8.1% or €2.37 billion (2019: 11.6% or €3.35 billion). Apparel and footwear retail was already under pressure before the pandemic due to competition from online retail. Corona ultimately only accelerated this trend. Moreover, in the wake of contact or exit restrictions, there was generally less demand for fashion necessities.

Overall, 2020 presented a multi-faceted picture for the retail sector. While brick-and-mortar retail tended to suffer, online retail grew by approximately 24%.

The first half of 2021 also fared well for the bulk of retailers due to the long lockdown. Click & Collect emerged as a survival tool for some, mostly owner-operated retail stores and is a testament to the tremendous creativity, activity and performance of brick-and-mortar retailers.

But these diverse activities should not obscure the fact that the sales situation in stationary retail, especially in branches and stores on the high street, remains tight.

Demand volumes are expected to stabilise in 2021. There may be slight shifts with regard to the distribution across the individual product groups. In the area of construction/gardening/leisure, demand remains high, so that a value at the previous year's level is within the realm of possibility. In the fashion sector, slight increases compared to the previous year are possible due to catch-up effects. However, the stationary share will not be able to recapture any relevant share of the demand volume that has migrated to online retail this year.

Corona pushes digitization

bulwiengesa AG

The pandemic has brought digitization in particular into the focus of retail companies. Due to recurring store closures and restrictions on shopping, stationary retailers were forced to reach their customers on new channels (omnichannel). In addition to click & collect, online platforms have also become more established. Accordingly, consumer expectations in terms of goods availability and delivery speed (same-day/next-day delivery) are also increasing.

Online grocery delivery services from the quick commerce segment, such as Gorillas, Flink or Bring, are pushing into the market as an example of this. They advertise, initially only at selected locations, a delivery window of 10 to 20 minutes. In order to keep this promise, the biggest challenge remains "the last mile". This is where retail space that has been vacant for a long time comes into play, which could find a new use as distribution centers. Compared with the rest of Europe, Germany tends to be a latecomer in the food delivery sector. Accordingly, international players such as Getir, Wolt or Knuspr are already waiting in the wings to position themselves in this segment on the German market as well.

Major changes are also on the horizon at MediaMarkt and Saturn. With new store concepts (Core, Smart Xpress and Lighthouse), online and offline offerings are to be better combined and more than 1,000 stores in Europe are to be remodeled, whereby the MediaMarkt name will probably increasingly become the figurehead of local retailing. Galeria Karstadt Kaufhof has also announced a far-reaching modernization of the company in this context, with over €600 million to be invested over the next four years, €200 million for the expansion of the e-commerce infrastructure alone.

 

The Corona pandemic increases the pressure on rents in prime locations

bulwiengesa AG

Prime rent

For the majority of bricks-and-mortar retailers, a slight upturn in sales first emerged with the easing or lifting of corona-related restrictions, which has gathered pace since the beginning of June. The pandemic continues to be seen as a catalyst for increased pressure on city centre retail rents in recent years, as does the significant increase in online retail sales in 2020. Demand for space in high-street locations is currently insufficient to stabilise prime rents. The gap between cities with rising and falling prime rents will continue to widen.

Accordingly, there will be a differentiated development of prime rents depending on the city category, the relevance for city tourism, the specific high-street stock and thus the retail attractiveness of the city centre.

After the prime rent for 1a locations in the Metropole Ruhr, which is achieved in Dortmund's Westenhellweg, fell by 6 euros/m² to 200 euros/m² last year, a further drop to 189 euros/m² was recorded by the end of the first half of 2021. Falling rents for prime locations were also observed in other submarkets of the Metropole Ruhr.

The average rent for prime locations in all submarkets of the Metropole Ruhr was 33.70 euros/m² by the end of 2020, 3.2% or around 1.10 euros/m² below the previous year's level. The average rent for city district locations showed a stable trend and stood at 8.60 euros/m² at the end of 2020.

By mid-2021, the average median rent for prime locations had fallen again by around 5.5% to 31.90 euros/m².

A key question in high-street retail is: Will it be a long road back and what does it look like? What does the future of city centres look like? Opinions differ here, but it is clear that it will take a long time to stabilise the city centre again. The rent forecasts are correspondingly uncertain, and the exact level of high-street rents is almost impossible to quantify. Many chain stores are thinking about streamlining their branch network, withdrawing or downsizing. On the other hand, pure internet players are considering moving into the city centre in order to support their internet business through emotionality. The topic of mixed use is becoming increasingly important - politicians are also launching programmes to strengthen city centres or are renting empty shops, for example. There is a consensus among all players that the city should be strengthened.

Sales area according to type of business

When looking at sales floorspace by type of business, there are only minor changes compared to 2019, which are concentrated in the types of business retail parks (> 8,000 m² VKF) and grocery stores (> 400 m² VKF).

The sales area in retail parks in the Metropole Ruhr fell slightly by 3.7% or 13,750 m² to around 359,000 m², while the sales area in grocery stores rose by 0.6% or 11,450 m² to around 1.875 million m².

The sales area in shopping centres (> 10,000 m² VKF) was unchanged at 764,800 m² at the end of 2020.