Two-thirds of East German shopping centres require overhaul: IVG

Around two-thirds of all shopping centres in eastern Germany require long-term revitalisation for the first time, according to a research report by German listed company IVG. Most of the shopping centres were built after re-unification in the 1990s, often with little expertise, the report said. All in all, two-fifths of the German shopping centre stock is in need of an overhaul. IVG puts the total refurbishment costs for German retail properties at between EUR 9.5 bn and EUR 12 bn in the next few years.

The states with the biggest supply of outmoded stock (between 55%-65%) are Mecklenberg-Pomerania, Bremen and Saxony-Anhalt. By contrast, less than a quarter of all shopping centre space in Berlin, Hesse and Hamburg needs to be revitalised. ‘The owners of German retail properties are facing a Herculean task in the next few years,’ the report concluded.

Foreign investors, some closed-end funds and a number of private investors own over 50% of all centres that require revitalisation and will be hit hardest by the trend, IVG predicted. The situation is considerably more positive for listed property companies, open-ended funds and developers, whose portfolios each include fewer than 5% of all centres requiring action.

IVG said intense competition and permanent change in the retail landscape were also contributing factors in addition to the usual ageing of the building stock. Moreover, as the ‘zeitgeist’ and buying patterns change more rapidly, the cycle for refurbishment measures has contracted from between 15 and 20 years to an average of 7 to 8 years in the last two decades.

The major German operators estimate that the cost of revitalising shopping centres is within a range of EUR 250 to EUR 2,500 per square metre, depending on whether a simple facelift or a complete rebuild is required. IVG believes the trend will lead to consolidation of sites.