Commercial Space
Ground floors: From problem zones to promising locations
The demand for commercial space in older buildings has increased substantially in spite of the economic crisis. Moreover, the lack of rent control regulations in this area supports higher cash flows and better yields for investors.
An article in a real estate magazine caused ripples across the branch in mid-March: The Vienna Chamber of Commerce reported a “rush on vacant retail outlets in Vienna’s ground floor zones” and indicated that these areas have been completely resistant to corona. To be specific, demand rose by 60 per cent ye- ar-on-year in 2022 and, according to the Cham- ber of Commerce, new locations were found for roughly 300 businesses. The increase was particularly strong in the inner city districts, with demand coming mainly from the retail trade and gastronomy – two branches that are faced with a difficult market environment. This report may seem surprising at first glance given the existing business climate, sluggish economy and visible decline in real purcha- sing power. However, a closer look provides an obvious explanation for the anticyclical boom in ground floor retail space.
property owners is also related to the higher cost of capital and the resulting focus on stable yields. In this respect, commercial space usually outperforms apartments. The relatively good de- mand situation – in spite of the difficult operating conditions – leads to expectations that vacancies will decline as the economic situation improves and higher rents will again be possible.
„Commercial space generates higher stable yields “
The increase over 2021 can be easily explained by weaker demand during the pandemic. Rising demand is now faced with a much smaller supply: Many former retail outlets were adapted for al- ternative uses like warehousing, offices or Airbnb rentals during and after the corona crisis. This re- duction in space was compounded by the routine loss caused by demolition and new construction.
Mario Schwaiger Head of Retail Properties
The transformation of these former problem zones into promising locations for investment
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