The future of German city centers: the road from department store to a successful mixed-use concept is long but rewarding

PwC study 2022: criteria for implementing mixed-use concepts

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Benjamin Schrödl
Partner at PwC Germany
Tel.: +49 30 2636-1331

From department store to mixed-use – analysis of utilization potentials

Today, little is left of the department store as a symbol of the German economic miracle. Changing consumer behavior and the emergence of new retail concepts have already led to a profound transformation of brick-and-mortar retail.

The COVID-19 pandemic is now profoundly continuing to act as a catalyst in in this development, from which online retail seems to be emerging as the biggest winner. Stationary retail is more and more disappearing from shopping miles.

“Investors as well as urban planners will inevitably have to deal with the future use of former department store properties. Small to medium-sized cities in particular will face major challenges.”

Benjamin Schrödl,Partner at PwC Germany

The PwC study of 2020 identified mixed-use concepts as most promising for the after-use of department store properties. In the current study, these findings were examined for practical feasibility at selected former department store locations that were affected by the wave of closures during the last two years.

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The study at a glance

With around 88 percent, almost all of the former department stores surveyed are located in designated core areas and only three percent in other special areas. In nine percent of the cases, the building development is fully specified by §34 of the German Building Code (BauGB). More than half of the former department stores require structural changes or adaptations.

“We are pleased to report that, just one year after the department store closures were announced, plans for future use are already in place for more than 70 percent of the closure sites, although extensive structural changes are mostly required to enable a long-term subsequent use.”

Thomas Veith,Partner at PwC Germany

In 91 percent of the cases, a promising mixed-use concept is possible in accordance with building law. Despite the age of the existing development plans (almost 60 percent are older than 30 years, 38 percent of them even older than 40 years), it has been shown that a fundamental adjustment in their original form is generally not necessary.

“A mixed-use concept, consisting of at least two types of use, can be implemented in accordance with building law at all of the former department store locations studied with a development plan in place.”

Benjamin Schrödl,Partner at PwC Germany

WIth 50 percent, the mixed-use approach is the most frequently selected form of after-use. In a further 38 percent of cases, a decision on the subsequent use and therefore also on a potential mixed-use approach is still pending.

Infografik zur PwC-Studie „Die Zukunft deutscher Innenstädte – vom Warenhaus zu Mixed-Use“

In 63 percent of the properties with existing mixed-use concepts, the integration of retail space is planned for the first floor.

“Municipal stakeholders in particular are likely to be particularly concerned about strengthening downtown retail.”

Harald Heim,Partner at PwC Germany
Infografik zur PwC-Studie „Die Zukunft deutscher Innenstädte – vom Warenhaus zu Mixed-Use“

Irrespective of the type of building use, individually determined in accordance with the Federal Land Utilisation Ordinance (BauNVO), a mixture of uses including classic forms of residential use, usually from the 1st floor upwards, can be achieved by means of so-called vertical division - this is a building planning procedure in which different types of usage are assigned for the individual floors of the buildings.

Infografik zur PwC-Studie „Die Zukunft deutscher Innenstädte – vom Warenhaus zu Mixed-Use“

Beyond the basic types of usage like retail, gastronomy, office and residential, site planning is based on local trends and gaps in demand. Examples include cultural after-uses such as an art pop-up store, integration of a gym, an opera house or a library.

Mixed-use scenarios are implemented more quickly in small towns. While in large cities investors avoid rash planning decisions due to higher land prices, there is increased pressure to define a timely after-use in smaller cities due to the larger impact of the city-shaping nature of department store properties. In addition, the bureaucratic channels in construction planning seem to be longer and more time-consuming in large cities than in smaller ones.

Infografik zur PwC-Studie „Die Zukunft deutscher Innenstädte – vom Warenhaus zu Mixed-Use“
Infografik zur PwC-Studie „Die Zukunft deutscher Innenstädte – vom Warenhaus zu Mixed-Use“

“The rapid elimination of vacancies offers the opportunity to significantly increase the attractiveness of the city centers again and, to attract other types of use in addition to shopping opportunities, such as housing in particular, back to the city centers.”

Benjamin Schrödl,Partner at PwC Germany

The methodology

To analyse former department store locations with regard to potential mixed-use reuse, 32 selected locations which shut down during 2020 were examined in more detail. More than 60 percent of the department stores surveyed are located in cities with a maximum population of 250,000.

In the first step exploratory expert interviews were conducted and evaluated to determine key criteria. A total of five experts, with correspondingly many years of professional experience and expertise in the construction industry and in the implementation of mixed-use concepts, were interviewed.

In general, the development plan and, in particular, the cooperation with the municipality as well as the general building condition were mentioned as particularly important criteria for the successful mixed reuse of the closure sites.

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Benjamin Schrödl

Benjamin Schrödl

Partner, PwC Germany

Tel: +49 30 2636-1331

Dr. Harald Heim

Dr. Harald Heim

Partner, PwC Germany

Tel: +49 30 2636-1354