Corona pandemic: what will happen to the malls now?

Berlin. Itzehoe is searching for “shopping city”. But if you drive on the escalators in Holstein Center in the city with about 30,000 inhabitants on the outskirts of Hamburg, you can quickly lose the desire to shop. Between lowered shutters, taped shop windows and empty areas, the last shops are struggling to survive. Only 13 of the 54 sales areas are in use, the operator is insolvent. The shopping town’s former exhibition piece with 40,000 square meters of retail space has degenerated into a haunted house.

Almost 600 kilometers as the crow flies to the south, the atmosphere is completely different. In the midst of the corona pandemic, a new one opened in Fürth with flair shopping mall: 18,000 square meters of retail space provides space for new attractions: In addition to the largest free-standing block aquarium in Europe and a giant roller coaster, the shopping center attracts new target groups with Germany’s largest virtual reality arcade, Hologate World.

“We no longer see ourselves as a classic shopping center. We see ourselves as a platform, ”says Michael Peter, CEO of the real estate company P&P, which built and now operates Flairen. It was the only new mall to open in the past year – and that’s a risk.

Corona pandemic: Retailers have large sales losses

Stationary retail has suffered hard during the corona pandemic and the shutdowns. Many customers and customers have discovered online trading for themselves during the lockdown times. Others, in turn, have specifically tried to make it small dealers to support the corner. For the large department stores with plenty of space, these are extremely bad alerts.

Developments in the United States show what this can lead to. gigantic Shopping malls are now empty there. Developments accelerated again during the pandemic. “It’s a bit humiliating,” says Lars Jähnichen, CEO of retail real estate specialist IPH, which manages more than 25 centers in Germany, including Gerber in Stuttgart, Hamburger Hof on Jungfernstieg in Hamburg and Goethe Gallery in Jena.

And yet, the retail culture in the United States is not comparable to that in Germany, Jähnichen explains. The shopping malls there are often outside the city and can only be reached by car – very different from the many inner city shopping malls in Germany. “We believe in the future of the format,” says Jähnichen. Also because, despite the pandemic, combined with rent deferrals and defaults unemployment rate hardly increased.

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Shopping malls are looking for new avenues after the corona pandemic

This is also due to the fact that shopping malls were forced to break new ground well in advance of the outbreak of the pandemic. “It is a very good alternative to shopping malls transformation in a neighborhood center, ”says Jähnichen, referring to the Gerber in Stuttgart. There was too much store space to fill it exclusively with stores. Instead, a hotel and a co-working area are now being built on the upper level. “We make a shortcoming into a professional: We create something that did not exist before,” says Jähnichen.

So will shopping malls in the future become a mix of residential construction, hotels, office space and shopping facilities? Market leader ECE is skeptical. “The industry composition in the centers themselves will generally be adjusted by a few percent in the direction of entertainment, gastronomy and medical services, but on average there will be no significant changes,” says Joanna Fisher, head of ECE marketplaces and thus responsible for the entire shopping center business in the Hamburg company, which manages 200 shopping centers throughout Europe with a sales area of ​​seven million square meters.

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The 48-year-old derives his confidence from the fact that the ECE shopping centers also came through the pandemic quite unscathed. that occupancy rate at ECE, it has fallen only slightly from 98 to 96 per cent. Last year, with around 2,500 leases and an associated area of ​​a total of around 750,000 square meters, even more contracts were entered into than before the pandemic. “It’s a commitment to physical retail,” Fisher says.

Corona: Lockdown has cost retailers a lot of money

However, the commitment has cost ECE a lot of money. During the shutdown, solutions were found companies from the impending insolvency – there were rent deferrals and partial waivers, and advertising money was also waived. “In total, more than 150 million euros went to support the tenants,” says Fisher.

During the pandemic, the customer frequency fell by a third, and last year the tenants generated a quarter less sales than before the pandemic. In the inner city areas there are sometimes not even half as many passers-by been on the move as usual, tenants’ turnover even fell by up to 60 percent in individual lockdown months. Seen throughout the year, the industry leader got away with a dark blue eye with a 25 percent drop in sales.

Extension is excluded. The last newly built ECE shopping mall opened in Singen in 2020. “We’ve seen the market in Germany as saturated for years,” says Fisher. which has risen markedly in recent years construction prices and at the same time, declining rents in retail would make new centers no longer economically viable. However, shopping malls can still be an attractive investment, says the ECE chief. For example, by buying them up, modernizing them and then servicing them or reselling them later.

After Corona: Shopping malls need to be replaced

The twin brothers Moritz and Phillip Kraneis also discovered this business model themselves. They invest in the purchase of existing shopping centers and those in need of renovation with the companies they founded, Deutsche Immobilien Opportuntäten AG (DIO) and Deutsche Wohn- und Betriebshaus GmbH department stores. Phillip Kraneis is convinced that shopping centers need to change in the future – and is already doing so. “It used to be unthinkable that there was a gym in a mall,” he says.

“Today, almost all malls have a gym because it was noticed that so much space can be taken up and that it is an attraction for people.” Therefore, he focuses on new usage concepts and space allocation. “The times when great textile chains more than half of a shopping mall is over, ”he says.

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The crucial thing is how to attract customers, says Kraneis. Some shopping malls, such as the Centro in Oberhausen, the largest shopping mall in Europe with 120,000 square meters of retail space and 250 stores, succeed in this because of their large size. In smaller cities, it is possible to integrate a good local offer in the center. Then shopping centers could also be interesting investments: “One yield more than six is ​​realistic, ”says Kraneis. However, he also limits: “One or the other mall lost its raison d’être during the pandemic.”

On the other hand, the flair in Fürth has been given a new raison d’être, as Michael Peter sees it at least. It is no longer enough to provide a sales area, says the entrepreneur. When designing and decorating furniture P&P Group therefore worked with a psychologist, and a special fragrance was also developed. “You have to stand out if you want to stand out,” says Peter. “People no longer just want to go to a mall, they want to go to an adventure center.”

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