Corona drops rents in retail

style="float: right; margin-bottom: 10px; font-weight: 600;"Wed 10th Nov, 2021

The Corona pandemic has caused rents in the German retail sector to collapse for new leases. Especially in the expensive metropolises, there are strong declines after years of boom, as a study published on Wednesday by the real estate association IVD shows.According to the study, retail rents fell in the first half of 2021 on average in Germany by a good 10 percent compared to the same period last 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 at almost 13 percent, according to the IVD. By contrast, the declines in small and medium-sized cities were significantly lower at around one percent to a good five percent.

According to the study, the discounts were most pronounced in Munich, where rents for small store spaces in new leases slumped by almost 27 percent. In Stuttgart, they slumped by 20 percent. In Berlin and Düsseldorf, the drop was much smaller (-12)."The higher the rents were, the more prices fell," IVD President Jürgen Schick told the Deutsche Presse-Agentur. Retail rents had risen sharply in recent years with a good economy. Now in some places - like in Munich - a load limit has been reached, he said.

In small and medium-sized cities, rental prices are significantly lower, so there is less scope for corrections. However, the trend toward online shopping has affected all cities.

According to the IVD, the average vacancy rate in the retail sector was recently around 20 percent - around a third more than before the start of the pandemic. The situation in the retail sector, which was already suffering from competition from online retail, had worsened. There is now a trend toward shorter leases and smaller spaces, Schick said.He called on policymakers to simplify building laws so that retail properties could be more easily converted into apartments or offices, especially in B and secondary core locations and in small and medium-sized towns.

The study examined office and retail rents in thousands of newly concluded contracts. Prices in 370 cities and towns covered by IVD market reporters were considered. According to the association, the brokers of the IVD, which also represent property managers and surveyors, advise on around 40 percent of all real estate transactions annually in Germany.

Unlike the retail sector, office markets have remained stable during the crisis - despite the trend toward home offices. Across Germany, rents fell by less than one percent year-on-year, according to the IVD.While declines of more than one percent were recorded in the largest seven German cities, there were even slight rent increases in small and medium-sized cities.Corona has merely slowed the momentum of recent years, Schick said. Between 2015 and 2019, office rents rose more than 10 percent, he said. During the pandemic, he said, there was initially a lot of uncertainty about the future of work. Now, however, the unemployment rate is falling again, which is also supporting the office market.

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