“The stationary retail trade hits the wall”

Residential real estate is becoming more expensive in the big cities – but fear for the inner cities is growing. According to the real estate industry, it is above all retailers that urgently need help.

Sale in the city center

Dhe Karstadt-Haus in downtown Frankfurt jumped off the beaten track again as the end was approaching. The branch on the Zeil was actually supposed to close at the end of October like the original more than 60 stores of the department store chain, but only a few days ago the employees heard the good news: The ailing department store group Galeria Karstadt Kaufhof is continuing to operate the business. Karstadt will remain in the building at least until January 2025. But the form in which clothes, toys and other things can be bought here is still unknown.

In times of Corona, uncertainty also reflects the general situation in stationary retail. The trade association fears the end for tens of thousands of businesses. Real estate professionals see the consequences dramatically. “The liveliness of the inner cities is threatened – it is the small individual users who are breaking away in pedestrian zones and commercial centers that will be missing,” says Andreas Mattner, President of the Central Real Estate Committee (ZIA), the central association of the real estate industry. “If we don’t take countermeasures here, drive brick-and-mortar retail against the wall. ”It is already clear today that there will be gaps in teeth in pedestrian zones and commercial centers. New concepts have to be devised for the properties concerned.

Small shops, large chains and numerous hotels are feeling the consequences of the corona restrictions. Many companies are threatened in their existence, as can be seen from the autumn report on the real estate industry in and after the Corona crisis, which the ZIA presented on Monday. In the first half of the year, 1,840 retail companies filed for bankruptcy, but that was around ten percent less than in the same period of the previous year. The reason for this is the currently suspended obligation to file for insolvency for companies that have become insolvent due to the Corona crisis.

Housing prices are rising with one exception

The corona protective measures are accelerating the trend towards online shopping. This is particularly noticeable in the textile shop with a decline in sales. Impulse purchases would also suffer from the shopping experience with distance and hygiene rules. Department stores have had problems for years due to large areas and a lack of profile definition. Michael Gerling, managing director of the Cologne EHI Retail Institute, who looked at the retail properties in the report, sees that the local supply locations are flourishing. He calls for quick and pragmatic approval procedures for the renovation to help the city centers.

While commercial real estate is coming under pressure, everything remains the same for residential real estate. Accordingly, there is no slump in residential construction, the purchase prices for condominiums and for one and two-family houses continue to rise. Nationwide, the median asking rent for existing apartments from April to June was 7.23 euros per square meter, similar to the first three months of the year. In the big cities, rents are increasing by around 3 percent.

New rules for shopping: Passers-by walk through the Europapassage shopping center in downtown Hamburg wearing face masks and keeping their distance.
New rules for shopping: Passers-by walk through the Europapassage shopping center in downtown Hamburg wearing face masks and keeping their distance.: Image: dpa

In Berlin, it can be seen that market rents are falling slightly. According to the report, this effect could also be seen before the corona pandemic. However, the number of publicly offered apartments in the capital halved from around 11,000 to only 5,400 from April to June. The authors do not attribute this to the pandemic, but to the rent cap in Berlin. This is likely to lead to a decrease in supply and an increase in demand. Some apartments are no longer rented out, but sold to owner-occupiers, used as a second home, rented out furnished for a short time or left empty.

Hotels before wave of bankruptcy

Nevertheless, there could also be a change in the housing market if the commuting distances become longer due to increased home work and thus the proximity to the employer seems less imperative. This could make the surrounding areas of cities and rural areas with a certain connection more attractive for those looking for accommodation.

Many stores lack impulse buying.
Many stores lack impulse buying.: Image: dpa

According to the study, tourism in Germany will only recover slowly and will not return to the level of 2019 until 2022. In the first half of the year, the number of overnight stays fell by almost 50 percent. This will have consequences for the hospitality industry: In our opinion, the existing state measures are hardly sufficient to counteract a wave of bankruptcies in the hotel industry, the extent of which is concealed by the suspension of the obligation to file for bankruptcy.

Andreas Schulten, General Manager of the consulting firm Bulwiengesa, expects that small and medium-sized hotel operations with low liquidity reserves and outdated concepts will give up, while the influence of financially strong hotel chains is growing. In rural areas, closings would lead to unemployment and trade tax losses. The public function of the hotel operations with restaurant and event facilities are also missing. For the study, he considered the development of office, logistics, hotel and care properties.

The market for office real estate should remain similar to the previous one. In large cities, vital demand contrasts with limited supply. It is true that there is an effect that with more home work, the need for office space decreases by an estimated 10 percent. Schulte, on the other hand, considers the effect that the number of office workers has been increasing for years to be significant. Care properties also remain in demand. The prime yields for nursing homes are currently around 4.3 percent and for assisted living around 3.5 percent.