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As 2024 unfolds, Germany's retail property market still presents a complex landscape, marked by significant shifts influenced by economic adjustments and insolvency repercussions.
According to JLL's latest analysis, the market kicked off the year with a transaction volume of €940 million—a stark decrease of 45% compared to the same quarter last year and the lowest since 2009. This figure, however, doesn't fully encapsulate the market dynamics, which have been skewed by a series of larger, mixed-use transactions that prominently feature retail elements.
Sarah Hoffmann, Head of Retail Investment at JLL Germany, sheds light on the nuanced reality behind the raw data. "At first glance, the market's performance might seem underwhelming, but considering significant deals like Munich’s Fünf Höfe and Maximilianstrasse 28, which collectively account for over one billion euros, the perspective shifts," Hoffmann explains. These transactions underscore a continued interest in quality retail spaces, particularly those bundled in mixed-use deals.
Insolvency-driven share deals as driver
The landscape of investment has been notably affected by insolvency-driven share deals. "The first quarter saw an uptick in share deals within existing ownership structures, driven by special situations where entities like Signa or Centrum adjusted their stakes due to the market's current exigencies," Hoffmann adds. This trend highlights the increasing complexity of investment strategies in the current economic climate.
Retail parks and commercial properties have emerged as focal points of activity, collectively accounting for a substantial portion of the investment volume. "Department stores are experiencing a resurgence in transaction activity, influenced largely by insolvency proceedings and subsequent ownership transfers. We anticipate this trend to intensify throughout the year," Hoffmann projects.
The investment confidence is further echoed by CBRE's findings, which reported a robust €1.7 billion investment in the retail sector in the first quarter alone, marking a 15% increase from the previous year. "Retail is increasingly prominent on investors’ agendas, driven by the sector’s dynamic nature in the current market," says Jan Schönherr, Head of Retail Investment at CBRE.
Prime retail properties have particularly stood out, with significant transactions in Munich contributing to nearly half of the investment volume in this segment. "The spotlight on prime retail locations reflects a strategic shift towards securing properties anchored by food markets and those in prime urban locations, which now command the lowest prime yields due to their resilience against online retail shifts," explains Anne Gimpel, Team Leader of Valuation Advisory Services at CBRE.
Prospects for the rest of 2024
Looking forward, both Hoffmann and Schönherr are optimistic about the retail market’s prospects for 2024. Hoffmann anticipates a transaction volume reaching up to seven billion euros, driven by strong demand for local shopping centers and the ongoing adjustments in department store portfolios. Schönherr concurs, highlighting potential growth in the second half of the year, pending favorable economic conditions and ECB policy adjustments.
"The retail sector’s resilience is poised to manifest more prominently as the year progresses, particularly as economic indicators stabilize and consumer confidence rebuilds," notes Dr. Jan Linsin, Head of Research at CBRE Germany.
As Germany's retail property market continues to evolve through 2024, stakeholders remain attuned to the shifts in consumer behavior, investment trends, and economic policies—factors that will undoubtedly shape the landscape in the months to come.
