Germany is shrinking, and its population is getting older in the process. According to official forecasts, the population – currently at more than 82 million people – will have shrunk to 65-72 million people by 2050, depending on the scenario. The highest value is only reached if some 250,000 immigrants enter the country every year – far more than the current figures. If all of the immigrants were taken out of the picture in an unrealistic scenario, only 50-60 million people would live in Germany by 2050. The Republic would then be a third smaller, and the social security systems would not be the only things about to collapse. In all probability, those over 80 would make up just as big a part of the population as those under 20 by 2050.
The development of cities has to take account of this demographic trend quickly lest we be completely unprepared to face local problems whose dimensions are already becoming clear in most cities in eastern Germany, which have lost some 15 to 30 % or more of their population in the past decade. Only a few cities such as Leipzig, Dresden, and Jena have managed to take measures to counteract this trend quickly enough. In the meantime, the first regions in western Germany have also begun to suffer from this shrinking process. These regions are not just special cases where, in the worst-case scenario, the industry on which the whole area was based has folded; rather, military bases were also closed when troops – and hence the local spending power – were withdrawn. The population has been dropping especially severely in the Ruhr Area. Several major cities there have lost tens of thousands of inhabitants. Since 1975, Gelsenkirchen has even lost 130,000 residents! The result: apartments are empty, spending power is plummeting, and infrastructure problems have begun to make themselves felt, as capacity is not being optimally used. The term “perforation of cities” has been coined for this process. The rest of the Federal Republic of Germany will not go unscathed. Now that mining areas have undergone this development, by 2015 other industrialised, densely populated areas will be affected. And even the prospering economic centres in Bavaria and Baden-Württemberg will suffer a drop in population starting in 2020 and have to deal with the consequences.
This inevitable development trend is not only a great challenge for urban planning. In particular, inner cities – and hence A1 city locations – also have to act. Depending on how attractive the city currently is, the danger may be quite imminent. Only a few economically sound large and mid-sized cities in the southwest of the Republic can currently afford to take serious steps to maintain their city’s attractiveness to some extent.
At least three issues are already typical of the drop in the number of residents, even for the development of city centres:
- The shrinking population will lead to a drop in spending power in all regional centres at the intermediate and upper levels in the mid-term to the long term. By 2015, spending power is expected to be some 7-8 billion euros lower annually just for the Ruhr Area. The need for shop floor space and the true A1 city locations that are not affected by the economic situation will decrease. In the light of these developments, the renovation of city centres that is taking place in many cities can only lead to a surplus of shop floor space, thus endangering rather than supporting the attractiveness of inner cities in the long term due to empty shops and depopulation. The perforation of formerly coveted pedestrian zones in some western German cities is already taking place; for instance, everything-for-one-euro shops are opening up within 200 m of what used to be the best locations in the city centre.
- This depopulation also means that infrastructure is not running at full capacity, and the shortfall cannot be completely covered by taxes. For example, power supply, waste-water treatment, and waste incineration are financed based on current income (the pay-as-you-go scheme), which means that low capacity utilization will lead to progressively rising incidental costs for real estate. Here, the retail sector (lighting, air-conditioning, packaging, etc.) is especially affected. The pressure on the net rent (without utilities) thus grows.
- The retail sector will have to start focusing sales on a more mixed population. On the one hand, the great variety of individual lifestyles – such as patchwork families and singles – are becoming more common to the detriment of traditional families. On the other hand, immigrants – who at least partially compensate for the demographic downturn and are thus crucial (wherever they are from!) – represent new target groups whose shopping habits are just as individual. Finally, the share of the elderly with spending power is growing, and they have their own specific desires (faithfulness to brands, product consulting, home delivery, etc.). The shop concepts offered thus have to be open for these changes, flexible, and adaptive.
A lot of chain store operators have already integrated the noticeable trends described above in their expansion strategies and marketing considerations. This goes for both the construction requirements for the shops and the special contractual regulations for renting real estate. In the past few months, we at Domino have not noticed any drop in demand for rentals of good locations in A1 city centres. Indeed, interest in just such real estate seems to be growing: the location is not only great, but it also allows the requirements of the individual marketing concepts of the various, still expansive chain store operators to be met to a great extent. At the same time, however, there is often a call for lower rent as the profit margins of the past few years apparently cannot be sustained. The decision-making process for new rentals of shops in A1 city centres is thus becoming more complex and multifaceted. The more expertise there is for an assessment of the location, the design of the shop, and the various retail concepts, the greater the opportunities for the owner to rent the real estate at fair terms in the long term.