International real estate advisor Savills has identified three regions in Germany with potential for shopping center development in sûdlicher Oberrhein (including Freiburg), Mûnster and Munich.
Taking into consideration purchasing power, the share of total retail space per person and the share of shopping center space compared with sales in these three regions, Savills researchers have identified a potential shopping center undersupply in these regions, making them ripe for investment.
Savills data shows that there is approximately 13 million m² of shopping center space in Germany. Currently Germany's shopping center density of approximately 159 m² per 1,000 inhabitants is low compared to France (797 m²), Spain (281 m²), and the Netherlands (240 m²). Savills believes the low shopping center 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 centers in Germany in terms of footfall, but overall there is a relatively low amount of shopping center space per inhabitant. So one can talk of future potential for shopping center development in Germany, in particular in the regions of sûdlicher Oberrhein, Mûnster and Munich."
The firm's data shows that there are currently 440 shopping centers in Germany, 40-50 are under construction and over 200 centers are in need of refurbishment. These unrefurbished centers, Savills argues, will provide investors significant value and add opportunities for asset management. Prime yields currently stand at 5.1% with secondary centers at 6.25%. Unrefurbished centers are traded around 7.75% depending of the financial injection that is needed.
Another driver for shopping center 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 center that will open over the coming two years.
Some are targeting international chains such as Hollister when planning new shopping centers - the fashion retailer currently has 10 shops in Germany which are all located in shopping centers, 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 centers have been rediscovered as favored retail locations and inner city shopping centers comprise 43% of total schemes with as much as 60% of development over the past 10 years in these locations. It is encouraging that retailers are committed to expanding and this should see more new developments."