Since the Corona outbreak, shop rents have lost a quarter of their value on average in major Bavarian cities

“While the Bavarian retail market was characterized by stability or a slight upward trend before the corona pandemic, the pandemic brought with it some changes in store staffing, even in the previously stable top retail location of Munich,” explains Prof. Stephan Kippes, head of the IVD -Market research institute. “Some traditional stores gave up their business completely, and numerous large retail chains significantly thinned out their branch networks as a result of a growing focus on online retail. Even in the top locations there were temporary vacancies. After a massive drop in prices in the very sought-after prime business core locations of major Bavarian cities, rents for retail properties continue to decline, sometimes at a lower level. Only in the sought-after retail location of Munich have rents been able to stabilize since spring 2023. “Still high inflation and subdued consumer sentiment are putting a strain on retail and are causing demand to slow down in all of Bavaria’s major cities.”

The IVD Institute analyzed shop rents in the prime business core locations of major Bavarian cities. Since the start of the pandemic, i.e. between spring 2020 and autumn 2023, shop rents have recorded significant price declines in all major Bavarian cities across all locations and shop sizes. In the sought-after prime business core, the average decline in major Bavarian cities was a quarter (-25.8%) for smaller shops of around 60 m². The discounts in this segment ranged from -8.2% in Erlangen to -41.7% in Regensburg. In addition to Regensburg, Nuremberg (-40.1%), Augsburg (-34.4%) and Munich[1] (-30.5%) suffered the largest price reductions. In addition to Erlangen (-8.2%), Ingolstadt (-12.3%) escaped with comparatively small declines in rents. Compared to the pre-Corona period, in addition to the lower rental prices, so-called “Corona clauses” were also established in the new contracts, which are intended to provide protection in the event of unforeseen business outages. Potential tenants also often strive for shorter contract terms.

Since the Corona outbreak, the larger shops of around 150 m² have lost -27% in shop rent on average in major Bavarian cities. For restaurants of this size, the range of rent discounts was between -10.0% in Erlangen and -38.7% in Augsburg. Aside from Augsburg, Nuremberg (-34.9%), Regensburg (-34.1%) and Munich (-31.3%) were among the cities with the highest price declines. Shop rents in Erlangen (-10.0%) and Ingolstadt (-14.6%) were least affected by the upheavals. If you only look at the most recent changes in the past year 2023, the half-year comparison between spring and autumn 2023 makes it clear that it was a difficult year for the retail industry. Shop rents in prime locations have fallen significantly in all major cities except for Munich (constant rents) when new rentals have been made; Regensburg and Augsburg in particular had to cope with steep discounts. The IVD Institute assumes that the market structure has not yet stabilized at the beginning of 2024 and that the bottom in the retail market has not yet been reached in many places. “Shop rents in most major cities in Bavaria will have to accept further reductions in the spring of 2024,” according to the IVD Institute’s forecast, “the state capital Munich, on the other hand, could continue to assert itself as a top retail location with stable prices.”

Source: IVD South