When Karstadt and Kaufhof close ...

When Karstadt and Kaufhof close ...


Retail
07.09.2021 Author/s: Dr. Joseph Frechen

Changes in ownership, state subsidies and new ideas have not prevented Galeria Karstadt Kaufhof from closing 41 locations. After all, the discussion about the future of city centres opens up numerous opportunities for department stores' properties. It is important to examine all uses without bias. A commentary on the future of department stores and a case study.

Department stores and their attraction are vital for the survival of smaller retailers in the neighbourhood, the gastronomy and thus the entire inner-city life, which is why they are classified as system-relevant - at least that is how the owner of Galeria Karstadt Kaufhof (GKK), the Signa Group, puts it. In fact, the department stores' type of business is in a dilemma: for decades they dominated inner-city retailing. They were the beacons of modern retail. The maxim "everything under one roof" was not only their own product range claim and advertising message, but also the offer promise to customers. However, this promise could be fulfilled less and less with the explosion of the range of goods and articles. Customers were also increasingly turning to new forms of offer such as shopping centres and sharply focused chain shops, which is why the department stores' groups trusted less and less in their format and sought their salvation with specialist formats or excursions into other sectors.

Fewer and fewer people are finding their way to the department stores'. Many houses have to close, the question of demolition or conversion arises more and more often.

An adjustment of the department stores' philosophy from "everything under one roof" to "selected products under one roof" was omitted. Only a few department stores mastered this repositioning. In Germany, Breuninger impressively shows how the department stores' can still prove itself as a place of surprises in the 21st century. Concentration on selected product groups and positioning in the high-priced segment, including luxury brands, ensure the often-cited shopping experience. However, this also means that this new generation of department stores can only be found in the top cities in prime retail locations in the "first house on the square".

Therefore, the department stores' time of suffering is not over yet. Apart from the loss of jobs, the closure and disappearance of department stores hurts all the more because of the role they have cultivated over decades. But it also makes it clear that the city centres must reorganise themselves in terms of urban planning and function and develop new points of contact and reference.

Demolition or conversion?

There are already good examples of this. For already in the past, during the creeping decline of department stores, many department stores could no longer be used exclusively for retail. The question of demolition or conversion arises more and more often; a mixture of properties with a wide variety of uses is becoming the order of the day. Even if retail is still one of the dominant uses of these department stores' properties, which are often located in integrated inner city districts, other typical inner city uses such as office, hotel and gastronomy are increasingly taking up significant proportions of space.

The current discussion about the future of city centres also opens up numerous opportunities for department stores' properties. While housing, for example in the form of micro-apartments, senior living or family living, was hardly an option for use in the past, it is currently being intensively examined, also by the administration and politicians. In the future, department stores' properties can represent an exciting microcosm of a mixed inner city and thus contribute to breaking up monofunctional inner cities. As the opportunities arising from the conversion of department stores' properties become more and more apparent and their valuable contribution to the rest of the inner city retail trade becomes recognisable, the understandable fears associated with the loss of the department stores' will diminish.

Case study

A multi-storey city centre property was built as a department store in the early 1970s and has since been operated by Kaufhof or, since the merger of Karstadt and Kaufhof in 2018, as Galeria Karstadt Kaufhof. The closure was announced about a year ago.

Due to the fundamental change in the retail sector - including a shift in sales to online stores, an overcrowding of retail space, the demise of specialist stores and the reluctance of chain stores to expand - it is unlikely that the property will be re-let as a retail property at adequate rents, but rather that a mixed-use property development will be initiated. Against this background, the property owner, together with the local municipality, is examining a demolition with subsequent new development. To support and flank further planning considerations, bulwiengesa has been commissioned to conduct a fundamental review of possible uses together with an architectural firm. For this purpose, all real estate uses will be examined and condensed into a viable, attractive use concept. The results will lead, among other things, to a profitability calculation for the entire project. In addition to residential uses, hotel, office, leisure and retail uses are included in the analysis.

 

Contact person: Dr. Joseph Frechen, Head of Division Retail and Branch Manager at bulwiengesa, frechen [at] bulwiengesa.de