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Retail Market Overview

Germany | 1st quarter 2018Published in April 2018

Retail lettings Germany in inner city locationsRetail trade confidence in Germany

Source: GfK, ifo-Institut; Status April 2018

Average annual take-up (2013-2017): 503,000 sqmRetail lettings

GfK income expectations

GfK economic expectations Ifo business climateGfK propensity to buy for retail (balances)

GfK consumer climateindex

2JLL • Retail Market Overview • April 2018 |

Improving retail sales forecast for 2018

The German economy remains in good shape and further growth

of 2.4% is forecast for this year. Consumer sentiment amongst

German shoppers remains high, boosted by rising incomes and

employment figures. HDE is forecasting retail sales growth of

around 2% to €523 billion in 2018, slightly below last year's

increase. Whilst bricks-and-mortar retail grew by just 1.2%

(€469.7 billion), the share of e-commerce sales grew by almost

10% (€53.4 billion). For the first time ever, e-commerce accounts

for more than 10% of total retail sales. It is evident that the gap

between offline and online growth is widening, although growth in

the online segment has slowed down over the past five years. In

2017, retail sales increased, particularly for bicycles, sports and

camping equipment, clothing and consumer electronics.

Satisfactory start to the letting year

With 119,400 sqm of retail space leased and 268 individualdeals,

the German retail letting market’s year got off to a respectable

start. Although the figure is approximately 5% below the previous

year's result in terms of volume of space, the number of deals

increased by almost 9%.

For the first time in four quarters, the Big 10 markets were able to

increase their share of total take-up, registering 53,000 sqm; this

compares to just 23,000 sqm taken up in the first quarter of 2017.

Analysing the individual results, all major cities except Hamburg

were able to improve their figures for the quarter, year-on-year.

Cologne (12,500 sqm) and Leipzig (11,900 sqm) currently

occupy the top two places, with both cities benefitting from high

volume lettings. In Cologne, Saturn's new concept store was a

key contributor to the good result, whilst in Leipzig, several

lettings were recorded around Petersstrasse, including

Petershof. The state capital of Saxony has already surpassed

-20

0

20

40

60

80

2013 2014 2015 2016 2017 2018

Indicator points, balances

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 Q1 18

,000 sqm

Contracts by size class

Pool: 268 lease contracts, Q1 2018

3

* Berlin, Düsseldorf, Frankfurt, Hamburg, Hanover, Cologne, Leipzig, Munich, Nuremberg, Stuttgart

Number of deals

Take-up

Total (,000 sqm)

Share Big 10*

Share international concepts

Total

Share Big 10*

Share international concepts

the total result for 2017. Only then does Berlin join the ranks

(7,900 sqm). The German capital is losing more and more of its

supremacy, with the other major cities increasingly being

considered by new labels as the gateway to the German market.

The most recent example of this is the Urban Outfitters Group’s

Anthropology concept which opened its first German store in

Düsseldorf. The capital of North Rhine-Westphalia started the

year with take-up of more than 6,800 sqm, thanks also to the first

lettings in the landmark Kö-Bogen II development.

Only Hamburg failed to maintain its momentum from last year,

registering just 3,800 sqm due to small-scale lettings. Although

the second half of the field were able to improve their letting

performance compared with the same quarter in 2017, it is clear

that Frankfurt (2,800 sqm) and Munich (2,300 sqm) in particular

performed below par. In Munich in particular, lettings appear to

concentrate mainly on the "Forum Schwanthalerhöhe"

neighbourhood development.

Smaller store sizes are becoming increasingly popular

For the fifth successive year, the two smaller size categories

(<100 sqm and <250 sqm) accounted for more than half of the

lettings, recording a share of almost 60% in the first quarter. In

the medium-size segment, there was stronger demand for stores

with 250 - 500 sqm and subsequently this segment increased its

share by 4 percentage points compared to the first quarter of

2017. The strongest demand here was in the restaurant/food

sector with 16 deals concluded. There was no change in the 500

- 1,000 sqm size category which accounted for all lettings in the

furnishing/décor segment. Large units with >1,000 sqm or more

were in less demand, falling four percentage points short of the

previous year's result; of the 28 leases concluded in this size

category, one third were attributable to the textile segment.

Nevertheless, textiles lost shares in space take-up by sector and

were only able to secure 24% of take-up at the beginning of the

year compared to 33% in the same quarter 2017.

JLL • Retail Market Overview • April 2018 |

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

245 289 235 286 268

33% 45% 36% 50% 44%

57% 56% 66% 55% 33%

126.3 120.2 98.2 103.7 119.4

18% 28% 33% 37% 44%

63% 63% 73% 63% 55%29%

29%

18%

13%

6%5 %

0%

20%

40%

60%

80%

100% ≥ 2,000 sqm

1,000 to < 2,000 sqm

500 to < 1,000 sqm

250 to < 500 sqm

100 to < 250 sqm

< 100 sqm

Evaluation of textiles sector by rental area

Pool: 28,200 sqm, Q1 2018

Lettings by business sector

Pool: 119,400 sqm, Q1 2018

4

With approximately 14,000 sqm, the young fashion suppliers

and textile discounters accounted for around half of take-up; the

Bestseller Group was particularly active with six lettings. The

restaurant/food and health/beauty segments were consistent

with 21% and 13% respectively. Sports/outdoor, which in the

last three years has only been able to achieve a 4% share of

take-up, is regaining momentum and is now sitting at 9% in the

analysis. This is due in particular to the activities of the French

sports article retailer Decathlon, which is also increasingly

represented in town and city centre locations and already

operates 50 stores in Germany. The other retail segments

examined were also stable. It remains to be seen whether the

textile segment will be able to win back shares of take-up during

the latter part of the year.


24%

21%

13%9%

7%

6%

11%

Textiles

Food/restaurants, etc.

Health/beauty

Sports/outdoor

Furnishings/décor

Telecomm./home electronics

Shoes/leather goods

Department store

Banks/insurance

Books/stationery

Others

28%

21%20%

19%

6%

Young fashion

Discount retailers

Clothing stores

Ladieswear

Ladieswear/menswear

Kidswear

Menswear

Excl. fashion

Prime yield unit shopsPrime rental index unit shops

* Berlin, Düsseldorf, Frankfurt, Hamburg, Hanover, Cologne, Leipzig, Munich,Nuremberg, Stuttgart, ** Basis 185 cities

5

Average prime rent Big 10*Average prime rent Germany**

%

BerlinHamburg

DüsseldorfHanover

Frankfurt/MainCologne

Leipzig Munich NurembergStuttgart

Prime rents are falling across Germany

Prime rents in top locations in the Big 10 markets have

remained at a constant level since the first half of 2017 and this

trend is forecast to continue throughout 2018. A further decrease

in rents, of €5.00/sqm/month, is only expected in Hanover in the

first six months of the year. Overall, rents in the Big 10 markets

decreased by 0.2% in the same period. In terms of all 185 retail

locations analysed, the average reduction was around 3% and is

broken down as follows: 105 cities recorded stable rents; falling

rents are observed in 73 cases; and a slight increase was

observed in seven locations which included Würzburg and

Rosenheim.

Despite the generally moderate demand and low rental growth,

demand for retail properties in prime locations is unwavering.

Multipliers in Germany’s ten most important retail markets

currently lie between 23 and 33 times the annual rental income.

In the first half of 2018, yields are expected to fall by between 10

and 25 basis points in Berlin, Hanover, Munich, Nuremberg and

Leipzig, and are expected to remain unchanged in all other

major centres.


100

110

120

130

140

150

160

H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18

Index value 2000 = 100

2.502.753.003.253.503.754.004.254.504.755.00

H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18

6

Prime retail rents Big 10

City (street) H1 2018 H1 2017 Change yoy Forecast H2 2018

360 360 0% 360330 330 0% 330310 310 0% 310290 290 0% 290280 280 0% 280270 270 0% 270260 260 0% 260185 190 -3% 185160 160 0% 160120 120 0% 120

Prime rent in Euro/sqm/month for a new letting, 100 sqm ground level with 6 m shop front

Munich (Kaufingerstraße-Marienplatz)Berlin (Tauentzienstraße)Frankfurt/Main (Zeil)Düsseldorf (Königsallee)Hamburg (Spitalerstraße)Stuttgart (Königstraße)Cologne (Schildergasse)Hanover (Georgstraße)Nuremberg (Ludwigspl.-Hefnerspl.-Karolinenstraße)Leipzig (Petersstraße/Grimmaische Straße)

Retail lettings (in sqm)

City Q1 2018 Q1 2017 Change yoyAverage

2013-2017Cologne 12,500 2,900 331% 19,700Leipzig 11,900 400 2875% 9,400Berlin 7,900 4,200 88% 40,300Düsseldorf 6,800 1,600 325% 16,800Hamburg 3,800 8,600 -56% 22,600Stuttgart 3,300 2,300 43% 18,000Frankfurt/Main 2,800 1,400 100% 22,100

Munich 2,300 600 283% 17,300

Nuremberg 700 600 17% 6,400Hanover 600 200 200% 5,200

JLL • Einzelhandelsmarktüberblick • April 2018 |


Deal Ticker BerlinCurrent lettings

1

2

3

4

5

Deal Ticker DüsseldorfCurrent lettings

LidlAnthropologieUnopiù

1

2

3

4

5ChidonkeyLe Creuset

IittalaPikolinosIntersport Olympia

RainsDior


Deal Ticker FrankfurtCurrent lettings

1

2

3

4

Deal Ticker HamburgCurrent lettings

1

2

3

4

Juwelier NiessingNileNyx CosmeticsAPM Monaco

HoganSofacompanySubduedLabel KitchenClassico5


Deal Ticker HanoverCurrent lettings

1

2

3

Deal Ticker CologneCurrent lettings

1

2

3

4

Royas by MotzigkeitAce & TateFrancesca & Fratelli

Pro-IdeeK.SocksSaturnMarkthalle Köln


Deal Ticker LeipzigCurrent lettings

1

2

3

Deal Ticker MunichCurrent lettings

1

2

3

4

DecathlonAlnaturaAce & Tate

GörtzAdicolor (Pop-Up-Store)AmbienteDirectSteiff


Deal Ticker NurembergCurrent lettings

1

2

Deal Ticker StuttgartCurrent lettings

1

2

3

Lederwaren AlbrechtHema

Home24BraxLushHema4

Copyright © JONES LANG LASALLE SE, 2018.No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

jll.de/research For further Research reports please visit our Research websiteOnline offers of office properties for lease can be found on our property listing website

Contacts

Jörg RitterManagement Board Germany, RetailFrankfurttel +49 (0) 69 2003 [email protected]

Dirk WichnerHead of Retail Leasing GermanyBerlintel +49 (0) 30 203980 [email protected]

Sandra LudwigHead of Retail Investment GermanyHamburgtel +49 (0) 40 350011 [email protected]

Helge ScheunemannHead of Research GermanyHamburgtel +49 (0) 40 350011 [email protected]

Anke Kaukars-HaverkampHead of Shopping Center Services GermanyFrankfurttel +49 (0) 69 2003 [email protected]

jll.de/buero

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