bulwiengesa MARKET STUDY Food retail in Germany – market structure data 2016 bulwiengesa AG Managing Board: Supervisory Board Chair: Headquarters: Berlin HypoVereinsbank München Nymphenburger Straße 5 Member of GCSC e.V. Ralf-Peter Koschny Hartmut Bulwien Legal structure: AG BLZ: 70020270, a/c.: 4410433058 80335 Munich Andreas Schulten [email protected] VAT ID: DE 164508347 BIC: HYVEDEMMXXX Tel. +49 89 23 23 76-0 Member of plan 4 21 Thomas Voßkamp www.bulwiengesa.de Charlottenburg HRB 95407 B IBAN: DE13700202704410433058 Fax +49 89 23 23 76-76 Market study – Food retail in Germany - market structure data 2016 bulwiengesa Produced for: TLG IMMOBILIEN AG Hausvogteiplatz 12 10117 Berlin Project no.: P1705-3663 Munich, 21 June 2017 bulwiengesa AG Nymphenburger Straße 5 80335 Munich Tel. +49 89 23 23 76-0 Fax +49 89 23 23 76-76 Market study – Food retail in Germany - market structure data 2016 bulwiengesa CONTENTS Page 1 MANAGEMENT SUMMARY 1 2 FOOD RETAIL PARAMETERS IN GERMANY 2 2.1 Demographic parameters 2 2.2 Spending power data 4 3 FOOD RETAIL 5 3.1 General structural data 5 3.2 Development of business types 10 4 RENTS AND YIELDS 19 4.1 Rents 19 4.2 Yields 20 © bulwiengesa AG 2017 – P1705-3663 Market study – Food retail in Germany - market structure data 2016 bulwiengesa COPYRIGHT NOTICE The findings and calculations presented in this study, and the research we have undertaken, have all been done according to the best of our knowledge and with the necessary care, based on existing sources and other sources accessible during the period in which the study was executed. 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Munich, 21 June 2017 © bulwiengesa AG 2017 – P1705-3663 Market study – Food retail in Germany - market structure data 2016 bulwiengesa 1 MANAGEMENT SUMMARY Development of food retail Initial situation Every type of food retail business is participating in the rising sales of that industry. Small food shops are the only group that is becoming Selling space in Germany’s retail industry currently amounts to around steadily less important. The big winners of recent years have been the 123.7 million sqm (2015); at 1.5 sqm of selling space per capita, supermarkets / large supermarkets and organic grocery shops. This Germany is fourth among European countries. Of that selling space, development reflects a society willing to spend more on higher-quality around 35.6 million sqm is used for food retail. Selling space has food. The discounter business model has overcome a brief period of remained relatively constant in recent years (+1.8% since 2010), weakness and increased its sales once again. The restructuring whereas retail sales have risen by around 13.1% to 483 billion euros process triggered by Germany’s hypermarket operators continues. between 2010 and 2016 (proportion of online retail: 10.9%); the increase has been as much as 16.6% in food retail. The online share of Rents and investment food retail has so far only reached 1.5%. Private households in Germany spent 13.7% of their total consumer Rental levels in food retail properties have risen by over 20% since the outgoings on food, drinks and tobacco products. Since 2005, spending year 2000; selling prices have risen disproportionally across the board, on these goods has risen by 19.6%, from 180.0 billion euros to 215.2 meaning that yields have declined considerably since 2008 (over 100 billion euros. Their share in total consumer spending, however, dropped basis points). Increased interest among investors is because of the high from 14.3% to 13.7%.1 stability and long-term security offered by food retail (restrictive planning policies, good credit ratings among food retailers, long-term Demographic parameters tenancy agreements). An aging society has forced retailers to think again about how to meet Outlook the needs of this growing age group. Over 65s constitute 21.4% of the population today, but will make up 33.7% by 2060. Urban areas can The concentration process in food retail will continue over the coming expect stable population figures, but many rural regions, and eastern years, and competition offered by online retail will intensify. More Germany in general, can expect a decline in population by 2060, which restructuring will happen at some networks of stores, because their will result in lower demand. operators are having to develop new sales and operating concepts in response to changing market conditions. 1 Source: Federal Statistical Office, HDE, EHI © bulwiengesa AG 2017 – P1705-3663 Page 1 Market study – Food retail in Germany - market structure data 2016 bulwiengesa 2 FOOD RETAIL PARAMETERS IN In the long-run – leading up to 2060 – according to the Federal GERMANY Statistical Office’s ‘13th Coordinated Population Projection’ in what is from the surveyor’s point of view its most probable version, 1-W1 (“medium” population, lower limit),2 we can expect a decline in 2.1 Demographic parameters population to around 70 million people coupled with a significant rise in over-65s, so that they make up around a third of the population. And An aging society is forcing retailers to consider how to respond to the the proportion of over-75s to the total population will almost double, to numerous changes facing them. The growing proportion of over-65s 20% (2017: approx. 11.3%). coupled with greater spending power is making the older section of the populace more important to retailers. The number of people of working age, however, will continue to decline. People born during the 1960s (Baby-Boomers) will be reaching Basically, retailers are having to respond to a change in population pensionable age from 2030 onwards, changing the population structure structure and the resulting changes in people’s needs by amending and considerably. improving the products and services they offer, and/or the shopping environment. The specific needs of the “65+” customer group Population development/forecast 2015 2060* Projected population structure* 84 2017 2025 2040 2060 82 < 15 years old 13.2% 13.4% 12.4% 12.1% million 80 15 to 25 10.5% 9.6% 9.4% 9.0% in 78 25 to 50 32.2% 31.3% 28.2% 26.4% 76 50 to 65 22.7% 21.8% 19.8% 18.8% 74 65 to 75 10.1% 12.1% 12.8% 13.7% 72 75 and over 11.3% 11.8% 17.3% 20.0% Population Source: Federal Statistical Office, bulwiengesa 70 Rounding differences may occur. 2015 2020 2025 2030 2035 2040 2045 2055 2060 * Forecast based on the 13th Coordinated Population Projection, version 1-W1 (lower limit) Source: Federal Statistical Office, bulwiengesa * Forecast based on the 13th Coordinated Population Projection, version 1-W1 (lower limit) 2 Assumptions: birth rate approximately constant at 1.4; basic life expectancy assumption; migration balance of 100,000 from 2014 © bulwiengesa AG 2017 – P1705-3663 Page 2 Market study – Food retail in Germany - market structure data 2016 bulwiengesa Many of the things which older people used to criticise have now been resolved in store design and construction. These include wider aisles, lower shelves, bigger product labelling, adequate seating and service- oriented staff. Some providers have even responded to sociodemographic change by launching what is known as ‘Generationenmärkte’ – generation stores. Older consumers differ from younger ones because they are more aware of quality, more loyal to brands and more willing to purchase luxury items, and they shop more frequently and are more critical in what they require, which means more customer orientation is needed. Population changes vary greatly across Germany. The total population in Germany will decline by 2030, but large cities and their immediate surroundings are likely to become more populous. Growing population is forecast especially for southern Germany and the Top Seven Cities. Rural regions, on the other hand, are being hit much harder by declining population. For instance, bulwiengesa predicts that large parts of eastern Germany and rural regions in general will see a population shrinkage of up to 20% by 2030, whereas big cities – including those in Demographic forecast eastern Germany – will either maintain a steady population, or grow. 2030 Change 2015-2030 in % bulwiengesa 2016 © bulwiengesa AG 2017 – P1705-3663 Page 3 Market study – Food retail in Germany - market structure data 2016 bulwiengesa 2.2 Spending power data Spending power consists of total net income and capital income as well as state subsidies such as unemployment benefits and pensions. Living expenses are not taken into account, which is why regional differences often do not appear as pronounced as we might expect. Spending power also gives no indication of income distribution within an administrative district, or the spending power of individuals, although there is no denying the importance of those factors. The average calculated per capita spending power for 2017 will be 22,239 euros, representing a nominal increase of 2.9% over the previous year.