Geomarketing      
 
  Press Release  
 
Bruchsal, July 26, 2013
 

Good retail real estate brings success to mid-sized cites

 

Mid-sized cities offer substantial retail trade potential, according to the GfK study "Retail Centrality 2014". To tap this potential, certain location and real-estate prerequisites must be met. An essential factor in establishing and maintaining an attractive retail landscape is the availability of good retail real estate.

In 2014, mid-sized cities such as Straubing, Passau and Weiden once again succeed in generating retail turnover more than twice the amount of the retail purchasing power available at those locations. With centrality ratings between 213.7 and 204.7, these Bavarian mid-sized cities lead the retail centrality rankings calculated by the GfK study, outpacing shopping metropolises such as Berlin, Munich and Hamburg. Fifteen mid-sized cities with populations from 20,000-100,000 rank in the top 20.

Top 10 districts in Germany – GfK Retail Centrality 2014

rank   
urban district (UD) /
rural district (RD)
​inhabitants
retail centrality*
​1
​Straubing UD
​45,099
​213.7
​2
​Passau UD
​49,038
​207.7
​3
​Weiden i.d.OPf. UD
​41,684
​204.7
​4
​Trier UD
​106,544 
​201.8
​5
​Schweinfurt UD
​52,098
​201.7
​6
​Würzburg UD
​124,577
​186.5
​7
​Rosenheim UD
​59,935
​181.9
​8
​Hof UD
​44,461
​176.2
​9
​Memmingen UD
​41,551
​173.4
​10
​Zweibrücken UD
​34,064
​169.5

?source: GfK Retail Centrality Germany 2014 l * >100 = inflow of purchasing power; <100 = outflow

The study “GfK Retail Centrality 2014” provides a breakdown of retail potential for all of Germany's regions. Values over 100 indicate an inflow of purchasing power, while values under 100 indicate an outflow of purchasing power. A total of 157 districts have a centrality rating above 100, while 245 districts have a centrality rating below 100. This means that 60 percent of Germany's districts do not succeed in converting the local population's purchasing power into turnover or in drawing additional purchasing power from further afield. There are various reasons that explain the sometimes surprising low or high retail centrality revealed by the study:

Successful large shopping centers and retail centers have a drawing power that extends far beyond their regional boundaries. For example, this effect can be observed in the tenth-ranked district of Zweibrücken, whose high centrality rating is due to its factory outlet center.

An additional factor is the regional significance of a specific town or city with respect to Germany's retail trade. Cites such as Straubing, Weiden and Passau serve as retail hotspots for the surrounding rural areas. All of these cities have large catchment areas that encompass a relatively high level of purchasing power. At the same time, the cities themselves have a relatively small number of inhabitants, which means that the inflow of purchasing power from the surrounding areas significantly exceeds the purchasing power of the cities' inhabitants.

By contrast, metropolises such as Berlin, Hamburg and Munich have a large number of inhabitants who predominantly shop within the city boundaries. While the retail trade in these cities draws many out-of-town shoppers, municipalities that serve as retail hotspots for surrounding rural areas draw proportionally even more shoppers.

Centrality rating of Germany’s five most populated urban districts

rank   
urban district
inhabitants
retail centrality*
​1
​Berlin UD
​3,375,222
​105.3
​2
​Hamburg UD
​1,734,272
​110.9
​3
​Munich UD
​1,388,308
​114.0
​4
​Cologne UD
​1,024,373
​122.5
​5
​Frankfurt am Main UD
​687,775
​105.9

source: GfK Retail Centrality Germany 2014 l * >100 = inflow of purchasing power; <100 = outflow

"Centrality ratings measure the extent to which a given area can currently draw turnover beyond the locally available purchasing power," explains GfK retail expert Manuel Jahn. "The greater the product variety and turnover volume, the greater the drawing power. A good retail location functions as a magnet for the surrounding region. This makes it even harder for already weakened small and mid-sized cities to lure back consumers."

An important and often underestimated factor behind this situation is the increasing lack of sufficiently large and modern shop spaces with attractive surroundings. "Franchise chain retailers are also looking for good locations in small and mid-sized municipalities," says Jahn. "But even if there many unoccupied retail spaces, expansion endeavors often still fail due to the lack of suitable retail real estate with acceptable conditions. In this age of online trade, tenants are increasingly less tolerant of real estate with small spaces and unfavorable layouts. At these already flagging locations, prominent chains usually only accept pure turnover rent, for which investments and financing are hard to justify."

Jahn stresses that cities, owners and project developers must summon the vision and decisiveness to offer retailers favorable conditions for establishing a presence at a given location: "Even communities with currently low centrality ratings can be very attractive to chain retailers if they offer good potential. But if cities with weak centrality do nothing, a vicious cycle of declining customer frequency, turnover, consumers and drawing power can occur. It's crucial that project developers, retailers and municipalities think ahead at least 10 to 15 years so they can flexibly react to emerging developments, particularly in these times of expanding online trade and increasing consumer demands for convenience and an appealing shopping experience."

For many small and mid-sized cities, maintaining vitality depends upon proactively modernizing the existing real estate according to guidelines from the city, determined in cooperation with real estate owners and retailers. Investigations from Great Britain – where the decline of small and mid-sized shopping cities has long been a theme – show that cities with historical architecture offer better conditions. But even the most appealing architecture will be of no use without a good retail offering. For this reason, Jahn argues that it's vitally important that product offerings be aligned with both the size of the catchment area and the characteristics of consumers in the region. This imperative is meant for both municipalities and retailers interested in establishing a presence at a given location. "Straubing is obviously doing many things well to earn the top spot in the centrality rankings: Compared to other small mid-sized cities, Straubing has an above-average city center offering of top-tier clothing, shoe and jewelry retailers; this offering is well chosen with respect to the city's socio-demographic characteristics and income situation. Thanks to sound urban planning policies, discount retailers are concentrated at a limited number of traffic-oriented locations that clearly target consumer demand in the extensive rural regions surrounding the city."

 
Definition of "mid-sized city"
 
 
According to Germany's Federal Office for Building and Regional Planning (BBR), a mid-sized city is a city with between 20,000 and 100,000 inhabitants. Cities with between 20,000 and 50,000 inhabitants are characterized as small mid-sized cities. Assuming good catchment area conditions and potential, these small mid-sized cities are in some cases as attractive for retailers as large mid-sized cities with more than 50,000 inhabitants.
 
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 Westdeutsche 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.
 
About the retail centrality study
 
 

A city's retail drawing power can be measured by comparing local demand (GfK Retail Purchasing Power) with retail turnover (GfK Retail Turnover).

The regionalized data on retail centrality is available for many European countries and provided down to the most detailed administrative and postal levels as a prognosis for the current year.

GfK Retail Centrality gives retailers an objective benchmark for identifying the regions, cities and postcodes within a given city that are able to draw and sustain particularly high levels of purchasing power with the existing retail offering. As such, this data is indispensable for planning and evaluating locations. In the case of expansion decisions, the retail centrality values should be considered in association with the number of inhabitants, GfK Retail Turnover and GfK Retail Purchasing Power. All three market indicators are consequently included in the "GfK Retail Centrality" study.

Additional information on the GfK Retail Centrality study can be found at www.gfk-geomarketing.com/centrality.

Illustrations
Print-quality illustrations can be found at www.gfk.com/Documents/News/2014/centrality.zip

 
About GfK
 
 

GfK is the trusted source of relevant market and consumer information that enables its clients to make smarter decisions. More than 13,000 market research experts combine their passion with GfK's 80 years of data science experience. This allows GfK to deliver vital global insights matched with local market intelligence from more than 100 countries. By using innovative technologies and data sciences, GfK turns big data into smart data, enabling its clients to improve their competitive edge and enrich consumers' experiences and choices.

Additional information can be found at www.gfk-geomarketing.com.

 
 
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