Retail rents fell by a good ten percent on a national average in the first half of 2021.
(Photo: imago images / Rupert Oberhäuser)
Frankfurt The corona pandemic has caused rents in German retail to collapse in new contracts. Especially in the expensive metropolises there are sharp declines after years of boom, as a study by the real estate association IVD published on Wednesday shows.
The retail rents fell in the first half of 2021 on a national average by a good ten percent compared to the same period in the previous year, which was only partially affected by the pandemic. In the seven largest German cities – Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf – they fell even more sharply by almost 13 percent, according to IVD. The declines in small and medium-sized towns, on the other hand, were significantly lower at around one percent to a good five percent.
According to the study, the discounts were most evident in Munich, where rents for small retail spaces in new contracts plummeted by almost 27 percent. In Stuttgart they collapsed by 20 percent. In Berlin and Düsseldorf the minus was significantly lower (minus twelve).
“The higher the rents, the more the prices have fallen,” said IVD President Jürgen Schick of the German Press Agency. Retail rents have risen sharply in recent years with the good economic situation. Now in some places – like in Munich – a limit has been reached. In small and medium-sized towns, the rental prices are significantly lower, so that there is less scope for corrections. However, the trend towards shopping on the Internet has reached all cities.
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According to IVD, the average vacancy rate in retail was recently around 20 percent – around a third more than before the start of the pandemic. The situation of the retail trade, which had previously suffered from competition from online trading, has worsened.
Smaller spaces and shorter running times are in demand
There is now a trend towards shorter leases and smaller spaces, said Schick. He called on politicians to simplify building law so that retail properties, especially in B and secondary core locations as well as in small and medium-sized towns, could be more easily converted into apartments or offices.
The study looked at office and retail rents in thousands of new contracts. Prices in 370 cities and municipalities recorded by market reporters of the IVD were considered. According to the association, the IVD brokers, who also represent property managers and experts, advise around 40 percent of all real estate transactions annually in Germany.
In contrast to the retail sector, office markets remained stable during the crisis – despite the trend towards home offices. Across Germany, rents have fallen by less than one percent year-on-year, according to the IVD. While declines of more than one percent were recorded in the seven largest German cities, there were even slight rent increases in small and medium-sized towns.
Corona has only slowed the momentum of the past few years, said Schick. Office rents rose by more than ten percent between 2015 and 2019. In the pandemic, there was initially a lot of uncertainty about the future of work. But now the unemployment rate is falling again, which also supports the office market.
More: The slow comeback of the New York real estate market.