Ominous signs have darkened the horizon for many brokers and owners of commercial real estate properties in German cities: renters have become much harder to come by in recent years, the numbers of leases signed are in a downward spiral. Especially, retail spaces with adjacent office facilities have been hit hard by decreasing demand. While the trend first occurred in smaller towns with old-fashioned pedestrian walk zones some years back, top locations in major German cities like Hamburg have now become a part of those market developments. According to a survey conducted by JJL, 7.7% of roughly 246.000 square meters allocated to retail use in Hamburg are vacant for the next 18 months, and about 8.1% of 209 outlets characterized as prime locations do not occur in anyone’s planning scheme thus far.
Dirk Wichner, Head of Retail Leasing JJL Germany, reasons: “What we see here are logical consequences of the growth generated by online retail and drastically changed consumer behavior. The times when on-site retail saw vacancy rates close to zero are definitely a thing of the past.” Textile outlets have come under particular pressure. Mario Litta, Team Leader Retail Leasing JJL Hamburg, adds: “Current market conditions dictate that top locations like Neuer Wall offer excessive supply of space – simultaneously, pedestrian traffic is declining.”
Dr André Helf, CEO of Collection Group, is well aware of those developments. He offers an alternative for proprietors of retail enterprises: “We monitor those market conditions constantly – and we are very well-informed about the changes taking place, not only in Hamburg, but in other big cities as well. Our Business Center in Hamburg is immediately adjacent to Neuer Wall, a top location in Hamburg’s city center. Retailers deciding to conduct their marketing, sales and distribution online can always rent small office spaces at our Business Center – which enables them to maintain an A1 address in downtown Hamburg without the high costs of former times. For example, there is no need any more for large amounts of storage space, since most retailers sell their goods directly export or straight from the line of production to their customers. Our offers are customized to our clients’ demands: Renters only pay the amount of space they need for the time they occupy. We don’t offer old-school minimal term leases because we don’t want our customers to be under any pressure. Our COLLECTION Business Center in Hamburg features state-of-the art conference rooms equipped with top-of-the line presentation tools. Those rooms are available for short term rentals, even by the hour, to entertain visitors and distributors, for example.”
Mario Litta (JJL) summarizes: “Hamburg’s commercial real estate market faces huge challenges – retail space rentals currently only score about half of the turnover compared to 2014.” Cost pressure on retailers is enormous – but can be reduced by digitizing the processes and moving into a Business Center for the administrative management.
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