An exact definition of the often quoted prime inner city location is not to be found anywhere. According to the general perception of the sector, the area attractive for inner city retailers starts where the level of rents escalates and where financially strong chain stores dominate. These in turn, usually follow predominantly only one economic fixed star: the frequency of pedestrians passing by. Changes of the routes of consumers have a direct effect on the assessment of a location and thus on the rent of commercial real estate, which takes many an owner by surprise.
In times past, the world was still in order. The typical German pedestrian zone was characterised by large magnets like Kaufhof, Karstadt, etc. soliciting customers at each end. In between, small and medium-sized (specialised) stores were located and profited from the customer frequency generated by the department stores. This principle is still applicable today but it can only be implemented in planning if the complete allocation of retail locations is safeguarded as is the case in large shopping centres. The management of those centres still focuses on the “dog bone model” which reserves both ends of a line of shops for large-area draw tenants like H&M, C&A, Saturn or Media Markt. These chain stores know of their significance for the weal and woe of a successful centre business and demand the best rental terms. Once these contracts have been concluded, renting of the other stores located in between is normally not a problem any more since the preconditions for sufficient customer frequency have been created.
However, planning can hardly control the routes of shoppers in the traditional pedestrian zones of inner cities. The availability of central, favourably priced car parks may at best influence the starting point of a shopping tour. From there, the stream of pedestrians seems to flow in the direction of the city centre as if it were guided by an invisible hand.
Regular frequency counts are performed in the centre – at least in major cities – while the deviations between competing institutes are partly considerable. Agreement seems to exist at least in the most popular pedestrian zones of Cologne and Munich with peak values of more than 14,000 pedestrians/h at Saturday lunch time. However, in many other cities with more than 100,000 inhabitants, results differ by more than 50% and raise doubts in relation to the methodology and purpose of such surveys. Only the fact that the total level of frequency counts in smaller cities ranges considerably below the peak values mentioned above is uncontested. A current report of the CCI Hanover states, e.g., for Göttingen’s prime location just below 5,000, Hildesheim and Bremerhaven even only 2,500 pedestrians/h. A correlation between the number of inhabitants and the inner city frequency is thus not recognisable while a direct interrelationship between the frequency and the level of rents is apparent. And, according to the observations of Domino, this is the starting point of the dilemma. For within a prime location, detailed analyses show again and again local peculiarities which can influence the flow of pedestrians past a store – mostly in a negative way – and thus cancel the significance of the generally determined frequency of pedestrians.
Annoying and yet limited in time is all of the construction work in pedestrian zones if, for example, mains have to be replaced and the respective excavation takes place immediately in front of the store for months causing losses in sales. In that case, even advertising campaigns with the usual “building site discounts” cannot really compensate such losses. The exchange of the pavement, for example, if ugly concrete composite stones are replaced by expensive natural stone mosaics, has a similar negative effect on the retail trade but increases the attractiveness of the pedestrian zone in the medium term.
So-called “street furniture” like benches or playing equipment for children can also act as a frequency brake. Some city councils are open to cases of severe hardship and are prepared to provide improvements if the retail trade suffers significant economic losses.
Large problems are experienced by all of those retail real estate objects which have profited from the immediate vicinity to department stores for years, but suddenly find themselves next to “sales ruins” after a department store has been closed and a successor could not be found. Even if the frequency of pedestrians reaches general top values for the entire length of the pedestrian zone, the stores adjacent to the right and left of a 50-100m wide empty front of shop windows are suddenly only worth a fraction of their original rent because the flow of pedestrians changes to the other side of the road already a few stores beforehand. At this point, a phase of gambling for possible adjustments of the rental agreement starts for tenants and landlords. In some cities, stores vacated by Karstadt, Hertie or Wehmeier were reconstructed within a very short period of time and re-rented to draw tenants with at least the same attractiveness. However, in Germany’s pedestrian zones, there are still many former department stores unoccupied and this worries the tenants of adjacent stores tremendously.
During recent years, a completely new determining factor, for which the term of “gastronomification” may be coined, has appeared and influences pedestrian frequency. The gastronomification of pedestrian zones in the Federal Republic is essentially the result of two developments: Firstly, the purchase of vital consumer goods has moved more and more from the inner city retail trade to the greenfield or it takes place in the Internet. The consumption in the inner city retail trade reduces itself increasingly to spontaneous “can purchases”. This requires an environment of lingering, leisure and relaxation, i.e. places with bistros, cafes or lounges where one can present to others the designer object one has just bought.
Secondly, the demographic development produces consumers who are increasingly older, well off and do not need anything urgently. They rather regard the city as a place of social gathering. This part of the population also appreciates places for recreation and lingering in central locations to see and be seen. Centre managers have already reacted to this trend and increased the areas for gastronomy significantly in their shopping palaces. If one could consume cake, biscuits and curry sausages only on about 5 % of the centre area in the beginning, two-digit per cent figures are now applicable.
The inner city pedestrian zones follow this trend. There is hardly a discount bakery which does not offer seats, no Italian ice cream counter which does not invite you to stay at polished aluminium tables. And, if possible, everything outside which is helped by global warming in general and – in case of need – by winter gas heaters in particular.
The gastronomification of pedestrian zones has severe consequences for customer frequency. The flow of pedestrians is led away from stores by the continually growing number of tables, chairs, and benches. In extreme cases, the shop windows of a retailer sandwiched between two ice cream parlours are not passed by any pedestrians any more and, consequently, customers will stay away. Particularly cities relatively attractive to tourists and with large gaps in occupied shops in traditional prime locations may fall into the trap of excessive gastronomification. What seems a short-term solution may, however, be the beginning of a negative development in the long run and will drive out the still remaining stores from the former prime locations irrevocably in the medium term. It would be better to maintain the previously often implemented grouping of gastronomic activities, e.g. at larger squares, and to counteract the selective extension into traditional retail locations.
In summary, it is to be stated that the figures concerning the frequency of pedestrians in prime city locations mentioned throughout the sector should – if at all – be used only very prudently as a basis for decisions. When re-letting a store in prime locations, the assessment of the flow of pedestrians directly in front of the store is much more decisive. This is applicable to both the status quo and when future changes become apparent in the immediate vicinity.