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GfK retail expert Manuel Jahn explores in a white paper whether retail centers constitute a sustainable investment with genuine substance or an overhyped asset that poses grave consequences down the road. Jahn also presents results of the GfK Retail Center Performance Report, for which GfK researchers evaluated around 250 retail centers in Germany according to more than 20 criteria.
GfK's geomarketing division carried out a comprehensive analysis of Germany's retail centers and published the results in the form of a "GfK Retail Center Performance Report". The report is an extension of GfK's analyses for the MEC retail center report, which was presented at the Expo REAL 2014 in Munich. The GfK analysis encompasses 250 retail centers and investigates factors such as anchor tenants, sales area, infrastructure, performance as well as upside- and refurbishment potential.
In his new white paper, GfK retail real estate expert Manuel Jahn presents the most important results of the GfK Retail Center Performance Report. He also details why GfK retail experts believe retail centers are an attractive asset class with growth potential for investors: "We estimate Germany's retail center market at around €12 billion on the basis of the object-specific sales area productivity and feasible rent-to-sales ratios. Currently making up around 20 percent of the retail real estate transaction volume, retail centers can rightly be regarded as constituting their own asset class."
In the first half of this year alone, €900 mil. has been spent on this asset class according to GfK's evaluation of the transaction statistics of the large real estate brokers. These half-year figures show around 7.5 percent of the entire market volume has been traded – a figure that should rise to 10-15 percent by the end of the year.
"Assuming this market dynamic holds steady, retail centers would change ownership every 7-10 years on average," explains Manuel Jahn. "Retail centers can already be regarded as a sustainable investment alternative thanks to the increasing professionalization in this asset class, which is marked by higher-quality new buildings, a larger number of successful refurbishments, better targeted tenant concepts and a growing management quota. These numbers outshine the previously favored shopping center investments and awaken the interest of investors, particularly institutional investors."
Retail centers are a meaningful retail real estate class not just for investors, but also for retailers, who must also separate the wheat from the chaff when it comes to selecting viable locations. According to Jahn, the size and turnover associated with these locations can differ enormously: "For retail centers between 10,000 m² and 76,000 m² of sales area, the turnover spread is even wider, from €15 million to just under €300 million p.a."
The branch mix of retail centers is dominated by grocery offerings. GfK's analysis of 250 retail centers in Germany reveals that the turnover share for groceries ranges from €2 million to €90 million, depending on the retail center concept. Fashion offerings generate turnover from €0.5 to €30 million per year.
According to Jahn, the GfK Retail Center Performance Report is meant to provide transparency and investment security for location decisions. The GfK analysis helps in this regard by offering insight into locations' need for revitalization. This evaluation led to some surprising results. "Using a scoring model, we were [...] able to rank the locations according to their quality as investments. On the whole, one would assume that none of the top retail centers are in need of revitalization. Even so, in some cases it is foreseeable that wide-reaching adjustments will have to be made; these will need to go well beyond merely cosmetic alterations in order to avoid losing market share to the competition."
The best retail centers are not always located in central metropolitan areas. For example, one of the top retail centers is located in a greenfield area. Jahn explains: "Established and successful retail centers that have been around a while were often erected in out-of-the-way commercial areas that are not well integrated into the city infrastructure and also often not visible from the main street axes. The fact that these locations have nevertheless established themselves in consumers’ minds during their decades of existences shows that typical place-related factors don't always play the decisive role."
About Manuel Jahn
Manuel Jahn heads GfK's real estate consulting division. He has been with GfK since 2004 and has extensive knowledge of the retail real estate branch thanks to carrying out location and real estate object appraisals throughout Europe. He was previously employed by Westdeutschen ImmobilienBank, where he was active in the project development of shopping centers. Jahn represents the retail segment in his capacity as a board member of the German Council of Real Estate Experts.
For additional information and to download the white paper, visit
www.gfk-geomarketing.de/en/download_white_paper_retail_centers.html. The GfK Retail Center Performance Report can be obtained directly from GfK.
Print-quality illustrations can be found at www.gfk.com/Documents/News/2014/fmz.zip.
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