Germany‘s inner cities are still the number one address when it comes to meeting people and shopping.
The world football championship brought this home in great style. Rather than being attracted to the green outskirts, people met up in the city centers to have a good time, celebrate – and do their shopping. Anyone who might be tempted to conclude from this that the traditional prime city locations have some kind of eternal attraction should be warned, however: In inner cities there is often an „Old Market“, which simply signifies that a new trading place has taken over from the old one. In the same way, the only place our great grandchildren may find an „Old Pedestrian Zone“ one day will be as a street name on the map, while they do their consuming in futuristic shopping malls or place their orders by mouse-click on the internet.
Do patent recipes exist for preserving the attractiveness of the inner city in the near future? Or are the owners of retail premises in many inner cities ultimately destined to be victims of a new tenancy structure consisting mainly of McCheap shops and characterized by rent-hopping and vacancy management? „Bonjour Tristesse“ is already the motto in many pedestrian zones today, where life was pulsating just a few years ago.
There are many reasons for the erosive tendencies in German inner cities. The exclusion of cars some years ago resulted in a loss of product variety in the pedestrian zones. Merchants of furniture and large electrical goods were forced to abandon the best frequented city sites because they were so hard to reach. Another reason for the dwindling mixture of stores is the high level of rents in the desirable prime pitch areas. Very few retail concepts can afford top rental prices. The gap between individual types of shop is also constantly widening, which further accelerates the selection process. Even in the inner city of Frankfurt, where planning regulations were implemented early on in an attempt to control the trade mixture, there are now unmistakable alarm signals to be heard. These even made front page news in the Frankfurter Allgemeine newspaper recently with the headline „Plöger is closing“ – the surprise announcement of the demise of a Frankfurt specialist delicatessen comparable only with Dallmayr in Munich. What is to become of inner cities if such attractive store concepts cease to function even in a financial and banking metropolis like Frankfurt, asked the leader writer in apparent shock. Could the customers possibly be at the root of the problem? Or is it the fault of the local politicians who voted in favor of additional retail space because of the attractive trade tax offered by the new shopping centers? Within just a few months of these centers opening, the same bemused politicians were bemoaning the emptiness of the traditional pedestrian zones.
A sudden retail floorspace increase of 20,000 to 40,000 m2 is too much for a small or middle-sized town to bear without negative consequences for the pedestrian zone. Anyone who has seen the empty retail units in pedestrian zones such as the main street of Weinheim an der Bergstraße cannot fail to be aware of the potential fallout from large shopping centers such as the Rhein-Neckar Center in nearby Viernheim. The same applies in the big cities. Essen, with almost 600,000 inhabitants, will have its city core turned upside down soon when the new Limbecker Tor Center opens with 70,000 m2 of sales space. The issue is now one of political dynamite. In recent local elections in Niedersachsen, the governing mayor of Oldenburg lost the decisive final ballot to a professor whose declared goal was to prevent the inner-city shopping complex „Einkaufszentrum am Schloss“. In Celle, too, opponents of the planned shopping center recently won majority representation in the city council, causing the mayor of Celle to put an immediate stop to any further planning.
VARIETY INSTEAD OF MONOTONY
From the customer‘s point of view, the profile of an attractive city center can be expressed in a few words: Variety instead of monotony … or action instead of boredom. There is also an understandable desire for products to be as reasonably priced as possible, although the trend „stingy is smart“ is finally on the wane. This is precisely where the dilemma begins, however, when closer consideration is given to the legitimate interests of the retailer or property owner
The only way the retail business can withstand customer price dictation in the long run is by optimizing procurement conditions and minimizing distribution costs via procurement cooperations and/or expansion. Most of these new cooperation and expansion models have a tendency to reduce variety. Clothes stores, which make up 50-70 % of inner city retail premises, attempt to counteract this loss by changing their fashion collections at ever shorter intervals. The aim of this strategy is to increase attractiveness and thus promote customer flow… which may possibly work as long as sufficient local purchasing power is available. But with a cautious, wait-and-see attitude among many consumers, special incentive offers are necessary to attract and retain customers. In large shopping centers with central management this is already part of everyday experience across the whole spectrum of stores, and it apparently works so well that according to the sales figures published, the annual sales turnovers of these shops show only one tendency, and that is upwards.
A BALANCED TRADE MIXTURE IS AN ESSENTIAL PREQUISITE FOR PREMIER LOCATIONS
More and more, the focus of attention in inner city development is centered on the owners of retail property … and their decision-making parameters and expectations are becoming increasingly complex. It is always hard for landlords to make decisions when the highest offer comes from a branch which is already over-represented in the area. Five mobile phone outlets distributed over 50m of the main shopping thoroughfare might just function in a large city like Bielefeld. But a row of discount bakeries next to each other offering cheap bread and paying top rents will not be economically viable in the long run. Quite a few landlords have experienced this first-hand in recent months, when suddenly faced with the prospect of having to look for new tenants or sub-tenants within a space of 2 years. Properties with frequent tenant changes rapidly lose their value and in the medium term acquire a reputation of being „hard to let“.
For these reasons it is advisable not to focus primarily on the highest achievable rent when re-letting premises. A property‘s value is most likely to remain stable when the location is first class and remains so. An up-to-date, wellcared for exterior with modern window frontage is a prime factor in the inner city mosaic. Distribution of the necessary modernisation costs can be made part of the rental contract negotiations in the same way as the terms of expiry, lease extension options and rent adjustment clauses.
The best way to ensure attractive pedestrian zones in large towns in future is to establish a shopping mile which invites customers to saunter through it and offers elegant, high-class stores and attractive gastronomic specialities. The three main conditions for this recipe for success are:
- Enough suitable premises to satisfy the high demands of large chain store operators who are customer magnets for the shopping mile
- A minimum supply of purchasing power for luxury consumer goods in an exclusive „golden mile“
- Town planning which promotes an attractive atmosphere with squares and courtyards which invite people to relax and linger in the city.
If even one of these three prerequisites is missing in the city center, or is negatively affected by large-scale interventions in the surrounding areas, the premier location is at risk. Domino‘s experience over many years has shown that in such cases all parties must be prepared to make concessions when signing a new lease.