Eurohypo sees excellent opportunities for department stores in A1 city center locations (DE)

Eurohypo believes that department stores in top-level, central locations in German cities will continue to hold their value for German retailers, and therefore remain attractive to investors. However, new concepts are needed to keep them attractive, according to Eurohypo.

"Like in the shopping centers, the department store in its modern form (…) will continue to be of central importance, including in top-level city-center locations in which retailing is highly attractive and retains a critical mass." That was one of the conclusions of a Eurohypo study released earlier this week about the investment market for department stores in German city centers. Despite difficult conditions, the demand for good and exceptional locations in German cities is at a pleasing level, writes Marcus Cieleback, Head of Research at the Real Estate Appraisal & Consulting, Research (RAC) division of Eurohypo.

There is, however, one condition to fulfil if these properties are to remain attractive, which is that the department stores must create new concepts to adapt to changing consumer preferences. The goods on offer are often too diverse, the architecture of many buildings is no longer up to date, and there have often been problems with the presentation of product ranges. All this has made it very difficult for owners and users to re-position themselves. One of the possible solutions, according to Cieleback, is the division of stores into several separate retail areas. Dividing part of the sales floor space into residential and office space is also conceivable..

Department stores selling ranges aimed in particular at the mid-price segment will, according to Eurohypo, lose some of their market share in the coming years to retailers in the cheap and high-price segments. The market has been polarising between high-price and cheap offerings for quite some time now, and this is set to continue, writes Cieleback in the research report.

By the year 2010, the market share of the mid-price segment will have sunk to 12.5%. Indeed, German department stores have had to contend with considerable market share losses over the past few years. In 1981, the mid-price segment had a 49% slice of the market, by 2000 that had dropped to 22%. Over the same period, the market share of cheap products rose from 24 to 41%, and that of high-quality, top products from 27 to 37%. Cieleback expects the cheap segment to have captured 50% of the market by 2010. This trend can only be countered by means of new, alternative concepts, says the study.

Source: Eurohypo

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