In the last 15 years, retail real estate experienced a fall from grace. Once the prince of the property industry, the sector became the pauper. Now, however, there are very real signs that retail is back, if not with a vengeance then with considerable energy. In the following pages, we examine just how strong that renaissance might be, highlight key recent developments in Europe - and provide space for expert commentators to set out their views on key sub-sector
Key recent developments in European retail
Opinion articles
This article was published in our October 2025 magazine
For much of the past decade, the story of European retail real estate has been one of struggle. The rise of online shopping, the pandemic’s disruption of footfall and a punishing cycle of higher borrowing costs all took their toll. Shopping centres saw vacancy rates creep up, prime high streets emptied in many cities and investors fled to safer asset classes like logistics and residential. For a while, retail was almost a dirty word in institutional property circles.
“From 1970 until around 2010, there was a massive boom in retail real estate,” says Rich Hill, global head of real estate at Principal Asset Management. “Gross leasable area grew substantially greater than populations in both US and Europe. That was fine until e-commerce created a tipping point. And what e commerce did is it changed the playing field. E-commerce was the tipping point, though, but I think it is a little bit of a misnomer to say e-commerce was the reason that retail real estate faced challenges.”
It should also be noted that e-commerce had different impacts in different parts of Europe. “In southern Europe, we didn’t have the same fallout from e-commerce that we saw in parts of Northern and Western Europe, because online penetration remained and continues to be relatively low,” says Marie Hickey, director, commercial research, at Savills.
“I think some of it is cultural, but it might also reflect the fact that Amazon hadn’t totally infiltrated Southern European markets, although they have been growing their share. It is growing in those markets and will continue to grow, but it is still significantly lower than in markets like the UK, Germany and some of the Nordic markets.”
Whether or not online sales are to blame for retail’s woes, the narrative is now changing. The latest research from the likes of AEW, Savills, JLL and Knight Frank paints a picture that is still complex, still uneven, but far brighter than the headlines of a few years ago. Investors are coming back, occupiers are showing resilience, and the fundamentals in many formats are stabilising. Across Europe, the tone has shifted from ‘can retail survive?’ to ‘where is retail strongest and how can we make it work?’
AEW’s latest outlook is perhaps the most striking because it puts hard numbers on what many investors have been sensing: retail is back in the game. In The Long-Awaited Renaissance of European Retail, the firm states: “European prime retail total returns are anticipated to average 8.2% p.a. in 2025-29, with shopping centres at 8.9% p.a., and high street retail at 7.4% p.a. Retail warehouses are forecast at 8.5% p.a. Over the 2025-29 forecast horizon, shopping centres are expected to deliver the highest total returns across retail sectors.”
Vacancy rates also tell a largely positive story. For years, investors assumed retail was too risky to offer reliable returns. Yet AEW shows that vacancy rates are stabilising, especially in prime markets. “Prime retail vacancy … has stabilised at 3% in Q3 2024, down from 4% in 2020,” it says. “However, shopping centre vacancy has risen to 6.5% as of Q3 2024. Vacancy for retail warehouses and high street have declined over the past 2-3 years.”
This is hardly a return to the boom years of the mid-2000s, but it signals a more sustainable base. AEW also tempers its optimism with caveats in its 2025 European Outlook: “Our base case projected rents and yields result in a 9.2% p.a. (2025-29) return across all sectors. However, if recent concerns for higher inflation and slower and fewer policy rate cuts materialise in the long term, our downside scenario quantifies the impact of these risks and still shows a total return of 8.6% p.a.”
That line tells you two things. First, retail looks competitive against other property types again. Second, the returns are sensitive to macroeconomic conditions. If inflation proves sticky and interest rates remain higher for longer, returns could soften, though AEW still expects them to stay positive.
If AEW’s data gives investors reasons to look again, Savills’ European Outlook 2025 explains why money is starting to flow back into retail. “Retail investment is expected to benefit from a boost in retail sales growth, driven by easing inflation and stronger consumer purchasing power,” it says. “Grocery shops, prime high street assets and retail warehouses will remain particularly attractive. But with buyers and sellers unlikely to find a consensus on pricing, at least in the short term, deals will not be easy to strike.”
In fact, grocery retail never really went away, according to Christopher Mertlitz, head of European investments at WP Carey, which specialises in buying largely grocery and DIY retail assets and leasing them back. “There have been a few years when the general market was thinking that all retail will disappear and move 100% online, but that’s not the case,” he says.
“In a way that opened up a lot of opportunities for us because when people put all retail into the naughty corner and just don’t want to look at it, that opens a lot of good opportunities. I don’t think convenience grocery retail is going to disappear. In fact, it’s actually going really strong. So, that has allowed us to close quality deals in these segments.”
The emphasis on grocery, prime high street and retail parks reflects a clear investor logic. Grocery is defensive: people always eat. Prime high streets benefit from tourism and luxury demand. Retail warehouses capture value-led shopping and are cheaper to maintain than enclosed malls. But Savills’ warning is important: if sellers cling to yesterday’s valuations and buyers demand discounts, transaction volumes could stall again.
Savills is also sober about rents. “European prime retail rents are projected to grow at an average rate of 1.3% p.a. in 2025-29, which remains below the anticipated inflation rate of approximately 2% during the same period,” it says. In real terms, that means retail is still in catch-up mode. Investors are betting on stable income and yield compression, not dramatic rental growth.
Then there is the changing attitudes of occupiers, and here JLL’s European Retail Market Outlook 2025 shows how retailers themselves are driving recovery. The company reports that “the European retail sector continued its gradual recovery in 2024 despite risk and uncertainty,” adding that “growth in real incomes [is] expected to boost retail spending in most European countries in 2025.”
The firm emphasises the renewed power of prime space. “Rental growth in prime retail locations is expected to outperform the broader retail market as competitive tension grows,” it says. That is a crucial point. Even in the age of e-commerce, physical stores remain critical. They serve as showrooms, fulfilment hubs and experience centres.
For Hill, this is a crucial point. “Not only is the consumer migrating back to retail real estate, but the tenants themselves actually recognise that they need retail real estate in a way that they maybe didn’t need it a few years ago,” he says. “Specifically, tenants are recognising that they need retail real estate to satisfy micro fulfilment. So, if you want to get your goods to the consumer in hours, they’re actually using their physical retail stores to do that.”
He adds: “It’s become a fully fledged circular ecosystem. You need e-commerce to satisfy the retail store and you need the retail store to satisfy e commerce. It’s actually become very symbiotic. There have been studies about this that show that when you close a physical retail store in a given market, usually your e-commerce sales go down.”
Hickey agrees, pointing out that things like servicing online returns is costly. “The cost of doing online for lots of retailers has got very expensive,” she says. “In nearly all markets, rents have reduced, so the cost of physical retail fell. Lots of retailers saw an opportunity to reduce some of the online costs by directing that business through their store through click and collect.”
She adds: :”Also, some of the younger cohorts prefer to go into physical stores to see and touch the product and try it on, but they still might make that purchase online. So, it’s about offsetting those increased costs of online and reconnecting with the customers to really drive and improve margins.”
So, retailers that once questioned the need for bricks and mortar are therefore now competing hard for flagship sites in city centres. JLL expects this to translate into more activity in the investment market too, noting “a gradual increase in retail investment transactions and traded volumes [is] anticipated in 2025 and 2026.” The message is clear: the store is back, but its role has changed.
What emerges from all the research is a picture of uneven but genuine recovery. Retail warehouses and grocery-anchored shopping centres are thriving. Prime high streets are bouncing back in cities with strong tourism and luxury demand. Secondary shopping centres remain under pressure and require active repositioning into mixed-use hubs that combine retail with leisure, healthcare or even residential.
Hannah McNamara, co-founder of consultancy P-Three, agrees that location is a key differentiator. “If you’re sat on a big shopping centre in a secondary town and you’ve got a River Island coming back to you, you’ve basically got no chance of letting it,” she says. “On the other hand, we act for St James Quarter in Edinburgh and I’ve got a list as long as my arm of people who want to take space.”
Geographically, Savills points to Ireland, Central and Eastern Europe (CEE), Spain and the Nordics as more positive markets, while Germany and France face more structural challenges. Knight Frank suggests the UK’s regional malls and Central London shops are set for rental growth, while JLL and AEW see pan-European resilience in prime retail.
What unites the commentary is a belief that the darkest days are behind the sector. As Knight Frank concludes in its retail update: “Attitudes towards the retail sector are the most positive they have been for 10 years.”
Russell Banham, head of UK at Commerz Real, which co-owns Westfield London, agrees that investor sentiment is more positive than he has seen for years. “Investors are buying retail - not just the private equity houses but other investors,” he says. “There’s a lot more activity in the investment market. The assets have been repriced and look competitive compared to some other asset classes. There are opportunities. You’re certainly seeing rents stabilise and once rents stabilise investors can see that there’s a path forward and there are good buying opportunities.”
Attitudes may well be shifting, but Hill believes most investors still have too little retail in their portfolios. “Most investors are underweight on retail real estate within their portfolios,” he says. “They’re also overweight on multifamily and industrial to various different degrees, depending upon the geographic region that you’re talking about. But retail real estate is now starting to be maybe one of the best performing asset classes in both the US and in Europe.”
However, no one suggests that the path will be smooth. AEW explicitly models scenarios in which inflation proves stickier and rate cuts slower. Savills warns that buyers and sellers may fail to agree on pricing in the short term, which could choke off transaction volumes. JLL cautions that risks remain around consumer sentiment, particularly in countries where wage growth lags. And Knight Frank stresses that although retailer distress is down, not all operators are equally resilient.
The sector is therefore entering a new phase - and one that requires active management. Passive ownership will not deliver the kind of returns investors seek. Owners will need to invest in ESG upgrades, flexible leasing and repositioning strategies. Retailers must continue to innovate, using stores as brand platforms and service centres.
For investors, the message is straightforward but nuanced. Retail is no longer a sector to avoid, but neither is it a sector to enter indiscriminately. And for communities, the return of capital to retail can be a force for revitalisation, provided it is managed in ways that serve more than just the balance sheet.
Key recent developments in European retail
Promenaden
Promenaden is a mixed-use prime retail and office portfolio in Oslo’s central business district. The portfolio, which comprises twelve properties, was acquired by a fund advised by MARK Capital Management in 2016 and is held in joint venture with a Middle Eastern institutional investor. The properties are managed by Promenaden, an Oslo-based entity wholly owned by the MARK-advised fund.
The portfolio is anchored by Steen & Strøm, the world’s oldest continuously operational department store, which opened its doors in 1797. The department store increased year-on-year sales by 6.9% in 2024, achieving record sales for a second consecutive year. Other notable assets include Eger Quarter, a shopping gallery originally built in the 1850s and now home to Europe’s largest luxury watch emporium, Bjerke House, following a multi-million-euro revamp.
The majority of the portfolio (71% by GLA) is on Nedre Slottsgate, a 96-metre avenue known as the ‘Bond Street of Oslo’ after becoming home to nine of the ten most valuable non-automotive luxury brands in the world. Gucci, Bottega Veneta, Hermes, Loewe, Saint Laurent, Moncler, Chanel, Louis Vuitton and Dior all occupy premises on the street, with Prada set to join them later this year.
Earlier this year, MARK secured a circa €320m senior loan to refinance the Promenaden portfolio. The investment facility was provided by Blackstone Real Estate Debt Strategies on a five-year term following lender outreach by Rothschild & Co and ABG. The transaction marked Blackstone’s first real estate debt financing in Norway and is understood to be the largest single-tranche refinancing of a real estate portfolio to have been completed in the country.
Key recent developments in European retail
Westfield Hamburg
In April this year, URW opened the retail element of its Westfield Hamburg-Überseequartier project. The opening ceremony was attended by Hamburg mayor Peter Tschentscher along with URW’s CEO Jean-Marie Tritant, chairman of the supervisory board Jacques Richier and the group’s management board.
The project opened 95% let with strong interest in the remaining units, according to URW. The 94,000 sq m retail component of the district comprises 170 retail, dining and entertainment units in total, including more than 40 food and dining concepts.
“We are tremendously proud to deliver the retail opening of Westfield Hamburg-Überseequartier today,” said Tritant. “This important milestone brings a new destination to the City of Hamburg, offering an exciting collection of stores, restaurants and entertainment venues in an architecturally unique setting at the heart of the city’s waterfront.”
The opening also adds a new asset to the group’s portfolio of shopping centres in major cities operating under the Westfield brand and represents one of its most environmentally sustainable to date. “Westfield Hamburg-Überseequartier exemplifies URW’s committed approach to sustainable development and social impact, while partnering with cities on their environmental transition,” URW said.
“Built on a former industrial site, the project highlights the group’s dedication not just to building a destination, but to creating a lasting district for the city of Hamburg. With a clear commitment to sustainability, this programme effectively combines cutting-edge design with a focus on the well-being of the local community, creating jobs and reshaping the urban landscape for a positive, long-term impact.”
It added: “A testament to this commitment, the project has earned both the BREEAM Communities and BREEAM New Construction Excellent certificates, marking it as a beacon of sustainable urban development in Germany.”
Key recent developments in European retail
Falckenberg Ensemble
In the centre of Munich’s old town, between Maximilianstraße and Tal, WÖHR + BAUER is redeveloping the site of a former multi-storey car park into a new neighbourhood.
Two mixed-use townhouses will replace the outdated structure, opening new pathways, squares and streets and reconnecting the historic street layout. This approach relieves the area of car traffic through a mobility hub on Thomas-Wimmer-Ring and also creates an “urban ensemble” that balances tradition with modern city life.
The Falckenberg Ensemble will host high-quality retail, galleries, traditional manufacturers and restaurants on the ground floor, with premium office spaces on the upper levels and exclusive residences on the top two floors. Directly opposite the Mandarin Oriental Munich, the residences combine the comfort of a private home with the services of the luxury hotel.
food retail
The resilience of European food retail
Investors in European food retail are feeling optimistic about the sector’s outlook. Consumer confidence is stable as inflation eases. Occupational demand continues, most strongly in the discount sector. And e-commerce-only offerings have failed to unseat the dominant market share of established blue-chip grocers that remain unbeaten on price, quality and value.
The importance of bricks and mortar in food retail is undiminished. Yield stabilisation across core property markets for food retail is a positive indicator that European food retail is on the right trajectory. We’ve also seen some limited evidence of yield compression.
With that said, how can we be confident that this stability will continue? One word comes to mind that is central to the investment thesis: resilience.
Arguably, food retail businesses have faced the most brutal tests of any real asset class over the last half-decade. For bricks-and-mortar grocers handling perishable and semi-perishable goods, the Covid-19 pandemic was the most drastic. The crisis mandated significant adjustments at the country-specific and local level that would alter almost every aspect of the supply chain, from format and layout to marketing, refrigeration and distribution.
Elevated inflation since the end of 2022 has also impacted European food retail – albeit, in a different way to Covid-19 when footfall all but evaporated as lockdowns were introduced. In this period, grocery operators have had to recalibrate how they forecast demand and adjust inventory by reviewing their bulk wholesale agreements to minimise markdowns, wastage and stockout penalties, while hedging key inputs. Despite these challenges, turnover has generally matched inflation over the period.
When taken as a whole, food retail has been through multiple revolutions in the space of a few short years. Very few aspects of their day-to-day operational infrastructure have not undergone some form of reconfiguration to meet consumer needs, the unintended effect being to stress-test and strongly position these businesses to outperform as market conditions normalise. The strongest operators have emerged fitter from these challenges.
From the perspective of an investor in the physical space, the resilience and quality of its occupier base should be viewed as a huge advantage. Many operators are large-scale companies, often listed, and under scrutiny from a wide array of shareholders. That they have retained long-standing credibility and have weathered a full spectrum of shocks to their balance sheets while servicing complex estates gives confidence in their longer-term prospects.
Challenges that have forced the grocery economy to innovate have, in turn, galvanised food retailers to carve out additional competitive edges. Developing out click-and-collect and same-day delivery is one example. Investors in food retail real estate obtain the dual benefit of security from diversified income spread among multiple revenue sources, while reinforcing barriers to entry in the form of logistics, warehousing and digital infrastructure, that new entrants cannot easily replicate.
Broken down by geography, almost no country has the same archetypal format mix or regulatory regime. On the continent, Portugal, Norway and Finland are already characterised by duopolies or triopolies, while France, Germany and Spain are less concentrated. Italy has a strong cooperative structure. Similar divergences are exhibited in the evolution of e-commerce.
For the reasons set out above, food retail has the characteristics and upside potential to be a defensive, resilient asset in institutional portfolios. Food retail offers inflation linkage through indexation, as well as highly diversified and stable income from a secure occupier base.
Managing the relationship between risk and reward in achieving food retail exposure does, however, depend on a deep understanding of the operator’s underlying trading performance and the local competitive environment. Resilience is a key general factor in food retail, but understanding this driver does not in itself offer value creation opportunities over granular knowledge of demand and supply, which guide the assembly of a sustainable asset mix.
From our perspective, this amplifies the ultimate goal of developing pan-European expertise in food retail investment. This is experience that we have built at Savills Investment Management through on-the-ground presence in all the key jurisdictions, creating the ability to underwrite country-specific differences in grocery retail operations. As a result, our European food retail strategy is growing rapidly.
Ian Jones is director of investment at Savills Investment Management
outlets
Europe’s outlet retail market isn’t just surviving, it’s thriving
Once seen as competitors to European high streets and online formats, Factory Outlet Centres (FOCs) are now viewed as a complementary component of a brand’s wider omni-channel retail strategy. They have demonstrated remarkable resilience in recent years, navigating a post-pandemic retail landscape shaped by inflationary pressures and evolving consumer behaviours.
While reductions in pricing of 30–70% remain a compelling draw for value-conscious shoppers, the outlet sector has evolved far beyond its discount-driven roots. A key feature of the outlet model is its turnover-linked lease structure, which ties rental costs directly to tenant performance, acting as a natural hedge against inflation.
Today’s outlet centres are increasingly defined by the strength of their brand offering. Premium and lifestyle labels are investing strategically in the channel - developing exclusive outlet collections and crafting store experiences that reflect their full-price retail environments. In the UK, we are already seeing that the average transaction value in outlet centres is around 25% higher than in traditional shopping centres or retail parks, reflecting the deliberate and high-value nature of these shopping occasions.
Larger outlet schemes consistently outperform smaller ones; greater scale can attract premium brands and anchor tenants, key drivers of higher footfall and turnover. Hence, site expansion is incentivised, with additional space and a more diverse tenant mix serving as proxies for profitability.
Firmly rooted in a strong value proposition, FOCs have evolved into a compelling blend of affordability and luxury, particularly within schemes led by premium operators like Value Retail, or in destinations such as La Vallée Village near Paris, where affluent catchments attract a high concentration of luxury brands.
The model appeals to consumers: sales across European outlet centres have grown at an average annual rate of 4.6% since the pandemic according to Ken Gunn Consulting’s latest European Outlet Industry Review - an impressive achievement given the economic volatility of the period. The momentum shows no signs of slowing, with sales growth projected to average 6% annually through to 2028, driving turnover to €30 billion.
Fuelling this bullish outlook is strong consumer appetite: McKinsey’s State of Fashion 2025 reveals that 70% of global shoppers plan to visit outlets or off-price retailers in the coming year, even if their discretionary spending power increases. In short, value is no longer a fallback: it’s a preference.
Across Europe, there are approximately 200 FOC schemes in operation, collectively accounting for more than 4 million sq m in Gross Leasable Area (GLA). Outlet space is highly concentrated, with five countries - the UK and Italy (19% each), France (11%), Germany and Spain (10% each) - housing 69% of total supply. With tight planning regulations constraining new supply, operators are focusing on expanding and upgrading existing centres. In tightly regulated markets such as France, Italy, and the UK, expansion remains the preferred route. In Germany, where planning restrictions even limit this, operators are looking at alternatives such as the repositioning of existing malls.
Another path to growth lies in the acquisition and repositioning of underperforming schemes operated by smaller players. Consolidation is therefore expected to accelerate, with mergers and acquisitions, such as Multi Corporation’s recent acquisition of Realm, becoming more frequent as larger operators seek to optimise and scale their portfolios.
Outlet operators are increasingly investing in experience as a key point of differentiation. Many are introducing pop-up activations, local brand collaborations, and modernising their schemes through refurbishment, sustainable design, and upgraded amenities. These enhancements are designed to drive footfall, encourage repeat visits, and appeal to younger, experience-led consumers. Retailers, too, are embracing the full-day experience, bringing the outlet experience closer to that of full-price retail.
With demand for FOCs expected to outpace supply for the foreseeable future on the continent, tight vacancy rates - just 2% in some prime schemes - are likely to persist, while prime rental growth is projected to hold steady at a European average of 2%. Limited supply and planning restrictions are supporting the value of institutional-grade assets, with prime yields expected to hold between 6–7% before gradually compressing, suggesting pricing may be nearing its trough.
As retail continues to evolve, the outlet sector’s blend of flexibility, strategic value, and consumer appeal ensures it’s not just surviving, but thriving.
Larry Brennan is head of European retail agency at Savills
luxury retail
Why luxury retailers are acquiring their own stores
While millions of pounds and euros ring through the tills of the high-end boutiques of Bond Street and the Champs-Élysées each day, billions are being spent on the shops themselves, as luxury retailers seek to cement their strategic positions on two of the world’s most glamorous shopping streets for the long term.
Feted for their exquisitely designed handbags, jewellery and haute couture, the likes of Prada, Chanel, Richemont, LVMH and Kering are increasingly laying down markers in the property world and have all made significant investments over the past couple of years. A significant portion of prominent flagships are now controlled by the brands that occupy them, rather than traditional landlords. This type of transaction has helped to elevate property investment volumes in London and Paris in a relatively quiet market.
Earlier this year, Prada bought Miu Miu’s flagship store on New Bond Street for £250 million. The Italian fashion house, which owns Miu Miu, acquired the property from the M&G Life Fund, owners of the building for over 100 years. The transaction took the amount spent by retailers on London’s most expensive shopping street in the past five years to £1.2 billion, a twelvefold increase on the £100 million spent in the preceding five years. There were no such deals at all between 2017 and 2019.
A similar land grab is occurring on the high-end streets of Paris. The most eye-catching examples saw LVMH acquire 101 and 150 Champs-Élysées for around €1.7 billion and Kering buy 35 Avenue Montaigne and 12-14 Rue Castiglione for more than €1.5 billion. Chanel and Hermès spent a combined €550 million to acquire their shops nearby last year. Further afield, Prada and Kering recently bought their stores on New York’s Fifth Avenue for a combined $1.5 billion.
This trend is largely driven by luxury retailers’ desire to cement prime positions on the world’s most iconic shopping streets amid fierce competition. While the twin impacts of e-commerce and the pandemic have hollowed out demand in many parts of the retail sector in recent years, the opposite has been true on the best pitches, where brand presence and recognition are seen as crucial, retail sales have been stron, and building ownership can give retailers full control in curating the customer experience.
the brands that occupy them’
Economic considerations are also a factor. After a dip during the pandemic, rents have risen to record levels. Prime Zone A rents on Bond Street stand at £2,600 per square foot, according to a 2025 report by Knight Frank. This follows a sharp upward movement last year, when luxury fashion brand Yves Saint Laurent reportedly agreed to pay a total annual rent of £13 million for a flagship store, well above the asking rent of £9 million amid strong competition. Becoming an owner instead of a tenant allows retailers to sidestep such negotiations in future, while also capitalising on the property value appreciation that anticipated further rent growth will bring.
This is not to say that retailers have not been willing to pay top prices for their investments. While rising interest rates have depressed the values of nearly all commercial properties during the market downturn, shops on the world’s best retail pitches have been almost immune to the whims of the property cycle. Transaction yields have returned to around 2% on Bond Street, which is where they were four years ago, when interest rates were practically zero. The average price per square foot paid by retailers for shops on the street has been above £13,000 since the beginning of 2024, a sharp jump on previous years and more than triple the average price paid in the decade preceding the pandemic.
A noteworthy transaction last May helps to illustrate the level of price appreciation. Swiss retailer Richemont, which owns a host of luxury brands including Cartier, bought 178 New Bond Street for £82 million, nearly triple the £33 million the building previously traded for in 2013 and a record price per square foot. The price reflected a keen 2.28% yield at a time when the Bank of England Base Rate was still at a 16-year high of 5.25% and 10-year gilts were trading at 4.15%.
Mark Stansfield, Senior Director of UK Market Analytics at CoStar Group
shopping centres
Why shopping centres still matter in B-cities
When international investors think of shopping centres in Germany, their gaze typically turns to the metropolitan flagships in Berlin, Munich, Hamburg or Frankfurt. Yet this narrow focus overlooks an important structural truth and with it significant investment opportunities. In many B- and even C-cities all across Europe’s largest economy, shopping centres are not relics of a bygone retail era but the last functioning gravitational force for physical commerce, often doubling as an essential ‘third place’ in the local community. They remain underestimated and therefore underpriced assets.
The logic is simple: every community needs a central point of retail gravity. In many smaller German cities, the high street has lost that role. Department stores have closed, mid-market fashion chains have retreated and peripheral pitches have hollowed out. What often remains is a single shopping centre—sometimes outdated, sometimes partially vacant, but still drawing the daily flow of consumers. Where competition is absent and alternatives are scarce, such a centre becomes the go-to retail destination.
Of course, there are exceptions. Two centres in the same town may cannibalise each other, or a nearby outlet village may siphon spending power. But the gravitational principle holds: in B-cities like Aschaffenburg or regional hubs like Ravensburg, a single dominant shopping centre can stabilise the local retail ecosystem. In Germany’s decentralised economy, the sheer size of a city matters less than the socio-economic profile of its residents, its adjacent communities and the resilience of its urban retail structures. In other words: gravity and size are not the same thing.
Germany’s retail investment market has been through turbulence but is showing signs of stabilisation. In 2024, retail property transactions totalled around €6 billion, almost a third more year-on-year, though still below pre-pandemic volumes. According to CBRE, international investors accounted for 68.8 percent of German retail investment volume in Q2 2025, underscoring that cross-border capital is again circling this market. Yet, only about 12 to 17 percent of that total (depending on the research source) related to shopping centres, underlining the relative neglect of this segment.
The repricing between locations and formats is clear. Prime net initial yields for shopping centers currently stand at around 5.9 percent in A-cities, such as Stuttgart or Frankfurt. In B-locations, yields climb to around 7.5 percent and in smaller regional centres they can be even higher. This gap underlines the opportunity: pricing reflects perceived risk, but not always structural indispensability.
Gravity alone is not enough. Left unmanaged, it dissipates. Revitalisation, however, can realign these forces and create renewed investment cases. Across the country, about 40 percent of shopping centres are under significant repositioning pressure, with average vacancies around 12 percent. For patient, expert investors, this pressure is not a warning sign but an invitation: acquire at attractive entry yields, reimagine the tenant and use mix, and benefit from limited new supply. Germany’s restrictive planning regime makes large-scale new retail development unlikely. The true pipeline is the transformation of the existing stock.
In B- and C-cities, capital expenditure budgets may be more limited than in metropolises, but carefully targeted investments can still reinforce a centre’s gravitational pull. Pairing essential anchors such as grocery and daily-needs retail with complementary concepts can unlock durable value. In Sankt Augustin, a small town in North Rhine-Westphalia without a historic town centre, IPH and its partners developed Germany’s first hybrid mall, combining traditional retail with an outlet concept on the upper floor, turning structural weakness into a differentiating strength.
From an investment perspective, B- and C-city centres now occupy a curious sweet spot. On one side, retail parks and grocery-anchored assets have become expensive as capital flocked into perceived safe havens. On the other, many high street properties in smaller cities may be cheap but lack cash-flow prospects. Centres with competent management and a good location sit between these poles: they are priced with risk but are structurally indispensable and deeply rooted.
The gravitational pull they exert means they often remain the only functioning retail cluster in town. With the right concept—integrating food anchors, healthcare, leisure and flexible office or hospitality—they can sustain traffic throughout the day and week. This is not theory; it is the outcome of projects already delivered.
Lars Jähnichen is managing partner at IPH Group
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