ACROSS: You have been working in retail consulting for over 30 years and have seen a lot of change. In your opinion, what is the greatest challenge at the moment?
Joachim Stumpf: There is no question that we have enormous social and political hurdles to overcome. The multiple crises repeatedly lead to upheavals. Society and the economy are not used to dealing with them. Unfortunately, politics brings little calm to the discussions and also unsettles consumers. In addition, at the end of 2024, there was a wave of redundancies in the automotive industry in addition to Germany’s already low economic growth. At the same time, however, consumers are seeing wage increases, and we are slowly getting a grip on inflation. Nevertheless, the propensity to save and the low willingness to invest show that uncertainty and negative factors still predominate.
ACROSS: What challenges do you see at the retail management level?
Stumpf: The big challenge here is aligning business models profitably, utilizing suitable digital opportunities, and creating stationary experiences. Regarding digital possibilities, many players initially only see the opportunities. In practice, implementation is complex. Where do I use digital opportunities? Do I only use them in marketing and/or sales? Or to improve channel interaction and organization? Then, there are the aspects of artificial intelligence (AI), process optimization, customer service, etc. Every single aspect involves investment. Many retailers keep investing in digital processes without foreseeing whether they will be profitable and accepted by consumers. Bringing these aspects together profitably is what makes a retailer competitive.
ACROSS: Which retailers are particularly well positioned?
Stumpf: We are observing a clear polarization between luxury and discount, as well as between experience and meeting demand. The luxury and discount segments are growing. However, there is also a polarization between strong and weak retailers; surviving mediocrity is becoming increasingly difficult.
ACROSS: What happens to those in the middle?
Stumpf: We are losing many suppliers here. In addition to the textile sector in general, this mainly affects medium-sized specialist retailers located in the inner cities of small and medium-sized towns. Internationally expanding retailers and manufacturers with their stores and showrooms are moving towards large cities and conurbations. Overall, we are also seeing a polarization between strong and weak locations. The advancing polarization is a key issue when we discuss the impact of the transformation in retail and what options we have to counter it.
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ACROSS: Beyond the retail level – what levels of polarization are there in terms of locations?
Stumpf: We have a level of polarization with the so-called macro-locations. Behind this are cities and regions that are resilient and less resilient. The resilient ones have more opportunities to compensate for the loss of retail. They attract international retailers and can replace lost space with hospitality or entertainment. Whether a location is strong or resilient is not only determined by its size. Factors such as catchment area, economic growth, purchasing power, tourism, or whether there is a university are at least as important.
ACROSS: What would be an example of a smaller but resilient city?
Stumpf: In Germany, this would be the Bavarian city of Rosenheim. With its 65,000 inhabitants, Rosenheim is much more resilient than cities of the same size or larger in North Rhine-Westphalia, where there are many city centers but hardly any catchment areas. Rosenheim is a shopping city between Munich and Salzburg and, therefore, has a high degree of centrality in retail. In addition to the macro level mentioned above, the micro-location determines whether a location is attractive. This is also getting polarized. For example, there are sections of a high street with good footfall and stable rents, although overall rents on this high street are falling, particularly at the edges.
ACROSS: In your opinion, what role does retail real estate, primarily shopping centers, play against this backdrop?
Stumpf: A study we conducted with Savills showed that a quarter of shopping centers are stable cash cows. However, these properties’ achievable prices are so low that sales are only initiated for individual reasons. In addition, there are hardly any core products on the market. Those that would sell do not achieve the book value. We expect the transaction market to pick up in 2025 as prices have bottomed out. In 2024, we saw substantial transactions with the Fünf Höfe and the Pasing Arcaden, but few in total, carried out by non-institutional investors. I believe value-added products will become very interesting in the coming years. We see movement here, and the interest rate cut will reinforce this. However, the buyers are not institutional investors but specialized, risk-averse, opportunistic investors. However, the situation in Germany is still too uncertain for risk-averse investors.
ACROSS: Nevertheless, there are properties in Germany that have enormous potential.
Stumpf: Yes, undoubtedly. But in most cases, considerable investments have to be made in the properties. For the seller, this means that they are prepared to accept depreciation.
ACROSS: Overall, however, there is too much space.
Stumpf: Yes, this applies to shopping centers and high streets. Almost everywhere where space is lost, less new retail space is created. Exceptions are the absolute top locations or large national shopping centers. This can already be seen in the refurbishment of department stores. Here, we often only have 20 percent of the original space, with retail on the first floor and a maximum of the second floor. The remaining uses are then all kinds of mixed uses, from residential to office to fitness or even kindergartens and medical care. When we create revitalization concepts, there is a gradation. The first interesting use after gastronomy and leisure is health, followed by other uses that bring in the public. These are, for example, public authorities or adult education centers. All of these are frequency generators with high synergies with retail. Then comes office and finally residential. This is a balancing act in the discussion. On the one hand, there is a desire to increase residential space in city centers. However, residential space poses challenges in terms of construction and building regulations, does not generate its catchment area, and is associated with high construction costs.
ACROSS: Ultimately, this means that the dominance of retail is about to be over.
Stumpf: We must rethink a wide range of spaces and the positioning of large retail properties. The issue of project development or refurbishment is becoming more complex. There is no one-size-fits-all solution. The market potential, competition, catchment area, building law situation, market and rental potential, investment requirements, property quality, and other factors must be considered and evaluated individually for each location. This is hard and creative work with very individual results for each property. Each property comes to a different conclusion. It is complex, and implementing such concepts involves considerable investment, but we also see that many market participants are no longer willing to invest.
ACROSS: The bottom line is that reduced retail leads to more complexity at all levels.
Stumpf: Yes, but despite all the challenges, I have a relaxed view thanks to my many years of professional experience: Viable solutions can be found for all properties, even if the path to them is sometimes economically painful.
ACROSS: This is an encouraging statement.
Stumpf: We must constantly rethink, reinterpret, and reimplement retail and its space. What always remains true, however, is that retail has been synonymous with encounters across all centuries and cultures. This is even more evident in city centers than in shopping centers. We are social beings. Technology brings simplification and fun but not human closeness. As simple as it sounds and as often as this statement has been made – meeting someone and experiencing something with all your senses makes a difference. Despite all the polarization and narrowing, shopping centers, if they are well managed, and city centers will remain interesting locations.
Joachim Stumpf
Joachim Stumpf is the Managing Director of BBE Holding GmbH / IPH Handelsimmobilien GmbH
Joachim Stumpf has been a management consultant at BBE Handelsberatung GmbH in Munich since 1988, with branches in Hamburg, Berlin, Cologne, Leipzig, and Erfurt. He has been the Managing Director since 2007. He has also been the Managing Director and shareholder of IPH Handelsimmobilien GmbH, a BBE subsidiary, and IPH Centermanagement GmbH since 1994. In 2024, he was appointed to the Council of Real Estate Experts of the ZIA Zentraler Immobilien Ausschuss e.V.
