Shopping centers in small and medium-sized cities – The potential catchment area as big unknown (2009)

When Hameln, a town of 58,000 residents (RS), opened its „Stadtgalerie“ in March 2008, the joy of a new shopping attraction in the heart of the town predominated. Exactly one year later, widespread disillusionment has come to the „Town of the Pied Piper“. Several shops once in prime locations are empty now and where the New Yorker fashion chain store tried to attract well-funded young people before, a car dealer is now attempting to make the best of it by offering Swedish steel products for sale. That is, what can happen…

The discussion on shopping centres seemed to have calmed down in recent years. The pressure of the retail trade on many municipalities demanding an increase in sufficiently large stores in order to counteract the partly drastic rise in rents in some cities was too strong. Adequate demand was available in such locations to fill a new shopping centre with an area of 30,000 sqm and more without any problems. Merely the place of the new project formed a point of discussion after the so-called green field sites outside of the inner cities had lost their advocates. In the meantime, the centres „have arrived in the inner cities“ and seem to have upgraded the traditional pedestrian zones. This was the impression gained by local politicians in Leverkusen from an inquiry directed to 11 other mayors before they decided in favour of their own inner city shopping gallery with an area of almost 23,000 sqm as described by the market leader ECE.

In their search for suitable locations, potential investors still offer to eliminate existing reservations of local politicians or to solve urban development problems concerning new centre projects. In Braunschweig, the desire of reconstructing the old Welfen Castle was taken up and a shop area of approximately 30,000 sqm was hidden behind a rebuilt historic sandstone facade with great love for detail. In the middle of the 90ies, investors even wanted to erect a new soccer stadium for the city of Münster if they were allowed to build a centre in the neighbourhood in exchange. And in Weil am Rhein in Southern Baden, a town of about 30,000 RS, the permission for a 27,000 sqm centre is sought offering to pay for part of the costs for a new street car loop. Often, it is only space problems of the municipality which are decisive and can be eliminated by a new shopping centre without any investment by the local authorities. This was the case in the new „Rathaus-Galerie“ in Leverkusen or also the „Allee-Center“ in Remscheid where the administration of the local public services was integrated. Why then are the latest centre projects causing such a stir if apparently win-win situations are possible for all parties involved?

After almost all large cities throughout Germany were covered with 414 shopping centres (10,000 sqm and more) at the beginning of this year, the remaining small and medium-sized cities are now increasingly at the centre of attention of the expansion plans of ECE, MFI & Co. according to the motto „grow or give way“. The crucial question is if and how centre planners will approach these new general conditions when the motto „think big“ does not necessarily help. In small and medium-sized cities, even favourable purchasing power indices with a concurring high centrality rate do not suffice anymore if they only concern 50,000 -100,000 RS. Therefore, larger catchment areas are needed. These are mostly determined on the map by drawing 2 or 3 circles around the potential centre location representing 5, 15, 30 or sometimes even 45 minutes of travel by car to reach the destination. A catchment area of 195,000 RS was estimated for the „Degg’s-Center“ opened in 1998 in Bavarian Deggendorf, a town of only 32,000 RS, for the 14,000 sqm of shop area at the centre. Two radii of 5 or max. 15 minutes of travel time were drawn around the city.

Exactly ten years later, the same operator opened the larger „Theresien-Center“ with 15,500 sqm in nearby Straubing (45,000 RS). Three travel zones formed the basis of the virtual catchment area in this case. However, the „expanded potential reservoir“ (more than 15 minutes of travel time) doubled the virtual catchment area to 222,000 residents. The fact that Deggendorf and Straubing are only approximately 30 km apart and that the outer circles of the catchment areas overlap to a large extent does not seem to play a role. Similar intersections can also be found in other centre projects in neighbouring cities. In this way, an independent catchment area (up to 45 minutes travel time) of respectively 1 and 1.3 million RS was determined by the radius model mentioned above for „Schloss-Arkaden“ in Braunschweig (opened March 07) and „Ernst-August-Galerie“ in Hanover (October 08) with a total of 60,000 sqm of sales area in spite of the fact that the two biggest cities in Lower Saxony are only 60 motorway kilometres apart. This means that the residents of the medium-sized cities of Peine, Wolfenbüttel or Celle which are situated in between are allocated twice as generators of frequency and revenue with this planning approach. How the catchment area of another 370,000 RS for comparably small Hameln only 40 km south of Hanover was ascertained will probably remain the knowledge of insiders. The consequences of such purchasing power forecasts have already been described at the beginning and should not really surprise anyone.

Contrary to large urban centres where retail trade shifts can only be slowly ascertained and can hardly be traced back to their cause, inapplicable purchasing power forecasts for small and medium-sized cities may lead very fast to noticeable effects on the inner city development after the opening of a centre. This is what the authors of the „Analysis of the effects of large inner city shopping centres“ of Deutsches Institut für Urbanistik (DIFU) published at the end of last year fear might happen. In conclusion, this study recommends to keep area expansions by shopping centres moderate if larger changes in the structure of the existing shopping area are to be avoided. „In concrete terms, this means that an inner city shop area expansion of 15% should not be exceeded in inner cities with an average selection of shops. At the same time, the inner city shop area should generally not be expanded by more than 15,000 sqm in cities with up to 200,000 RS in order to prevent an autarchy of shopping centres.“

So far, there are only a few promising examples of how smaller centre projects try to work against negative sales trends. In Weinheim an der Bergstraße (44,000 RS), strong efforts are made to resist the trading-down effect triggered by the extension to 60,000 sqm of the „Rhein-Neckar-Center“ located in Viernheim at a distance of 7 kilometres which has absorbed a large share of the purchasing power in recent years. At the beginning of next year, the „Weinheim-Galerie“ will open with „only“ 9,000 sqm and anchor tenants like C&A, dm-Markt and H&M on the premises of the former „Birkenmeier“ department store. The pedestrian zone is already reviving as a prime location by new financially strong chain stores like Gerry Weber, Esprit or Bonita. It remains to be seen whether Weinheim will succeed in establishing itself as a pleasant shopping town for consumers with this restructured trade mix and clear scope and in counteracting the loss of purchasing power in direction of the mega centre.

So far, one has had the impression that present market leaders among the centre operators were not economically interested in shopping malls considerably below 20,000 sqm. Only behind closed doors, operators consented that one „would also take only 15,000 sqm if it were absolutely necessary“. However, a reconsideration process seems to have taken place at least at ECE. Currently, the new „Schloßhöfe-Center“ with „only“ 10,000 sqm is being established in the centre of the attractive retail trade location of Oldenburg, a city of 160,000 RS. With the methods for the ascertainment of the catchment area mentioned above one would have surely justified a shop area three times or four times as large.