Retail Market Report Austria | 2022/23

Retail Market Report Austria|2022/23 We stand for Retail

We stand for real estate.

Introduction

The economic upheaval caused by the war in Ukraine has clearly left its mark on the Austrian retail trade – a sharp rise in inflation, disrupted global supply chains and household budgets negatively affected by the dramatic increase in energy prices have made “busi- ness as usual“ impossible in recent months. With its dependence on the ups and downs in the retail sector, the market for retail space has also been unable to disengage from these developments. But just as boom phases are not really a convincing reason for elation and careless optimism, the current difficult situation should not lead to the opposite effect. Today’s problems were triggered primarily by a singular event, which means there is justified hope that they will not result in a longer crisis - and we can expect a market return to normalcy in the foreseeable future.

Above and beyond the war in Ukraine and the energy crisis, the outlook for the retail property segment is definitely positive: The traditional retail trade has become increasingly successful in making online a value-enhancing part of its overall offering. Nume- rous innovative, international concepts are currently evaluating opportunities for entering the Austrian market and, not least, the steady increase in the population forms a sound basis for structural market growth. Per capita selling space represents another important factor due to its decline to a solid level in recent years. The market will, consequently, again offer attractive opportunities. We cordially invite you to contact our EHL retail and investment team experts and together evaluate how you can best utilise this potential.

Michael Ehlmaier FRICS Managing Partner EHL Immobilien GmbH

Stefan Wernhart MRICS Managing Partner EHL Gewerbeimmobilien GmbH

Mario Schwaiger Head of Retail EHL Gewerbeimmobilien GmbH

Alexandra Bauer MRICS Head of Market Research EHL Gewerbeimmobilien GmbH

Overview of the Vienna retail sector

Executive Summary

Positive trends currently overshadowed by the war in Ukraine

see the current situation as a chance to complete long-awaited rentals at top locations.

Further decline in average per capita selling space

The war in Ukraine and its economic consequences, above all the sharp rise in inflation, are completely overshadowing all other developments in 2022. Retailers are currently confronted with a lack of planning security, and expansion plans and invest- ments are frequently placed on hold. Discounters and retail parks are the big winners in the crisis The decline in real purchasing power is motivating, or rather forcing, consumers towards particularly price-conscious shopping behaviour. This trend is benefitting discounters in the food and non-food sectors as well as retail parks, where these local suppliers are traditionally well represented.

The market is losing more space through demolition and changes in use than can be added with new con- struction. In combination with the steady population growth, this is leading to a continuous decline in the per capita selling space. Strong population growth provides new impulses for the food trade The food trade, and above all the discount seg- ment, remains the most expansive sector in retail trade. Renewed strong population growth in 2022 will support a further expansion of the consumer base. Retail space as an increasingly impor- tant target for service providers The service segment is becoming a more im- portant factor for the use of retail space. Sound growth has been recorded, above all, by health and fitness providers, while banks are continuing to reduce their already heavily rationalised branch networks.

Focus on sustainability

The EU Taxonomy will become an even stronger mo- tor for sustainability in retail properties. The main fo- cus here is on measures to reduce energy consump- tion, conversion to environmentally friendly energy carriers and the minimisation of ground sealing.

Top locations are the best bet in the crisis

The streamlining of branch networks and shop closings are a visible fact in all market segments. At top locations, the demand for vacant space is increasing substantially and, above all, international luxury labels

The Retail Market in Austria

A difficult environment and lots of ques- tions

unclear situation surrounding the Ukraine conflict and energy supplies in Austria and Europe have made reli- able planning nearly impossible. Only a limited number of new rentals have been concluded since the spring, and advanced negotiations are frequently on hold. The tensions caused by the economic effects of the war are overshadowing several positive long-term trends: The general cancellation of corona-related restrictions and an optimistic economic outlook up to January led to expectations of a noticeable upturn. The large number of original retail concepts also provided grounds for optimism that brick-and-mortar retail could transform the challenges created by online competition into innovation and new momentum. A further bonus is the return of city tourism and the related increase in turnover.

The retail property market is currently in a challenging phase. Traditional retailing is under pressure from the sharp rise in wholesale prices, a weakening economy and decline in purchasing power, rising personnel costs and strong online competition – all of which have led to caution in location decisions. According to the Austrian Retail Trade Association, retail turnover fell by eight per cent year-on-year in the second quarter of 2022 and the decline in non-food was even stronger. Gastronomy has also felt the effects of the crisis, but to a lesser extent. The result has been a substantial, short-term drop in the demand for space.

These negative factors have been accompanied by greater uncertainty over future developments. The

In other words, there are bright spots in the midst of this generally gloomy situation: The winners include

Development of retail space in Austria

2.0 % 1.5 % 1.0 % 0.5 % 0.0 % -0.5 % -1.0 % -1.5 % -2.0 % -2.5 %

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022p 2023p 2024p

Source: RegioData Research GmbH Wien 2022

Development of purchasing power per resident

1.5 % 1 % 0.5 % 0 % -0.5 % -1 % -1.5 % -2 % -2.5 % -3 % -3.5 % -4 %

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2020

2021 2022p 2023p

Source: RegioData Research GmbH Wien 2022

– a hardly surprising fact – non-food discounters like Action, KiK, NKD and TEDi, which are continuing their expansion programmes and on the search for additio- nal locations. The furniture trade and new showroom concepts are also interested in inner city locations. The continuing low production of new space has had a stabilising effect. Investments have been directed primarily to improvements in existing buildings, and there is little interest in the creation of additional space. This is taking place, for the most part, in the ground floor zones of residential projects. According to Standort + Markt, retail parks have also seen an increase in space – 17 retail park clusters have opened since 2019 – among others, due to the sound development of the food trade, drugstores and non- food discounters. However, the space removed from

the market continues to exceed new construction, especially at weaker urban locations. The end result will be a reduction in the selling space per resident, which is still higher than the European average. There has been no evident upward trend in rents this year, and discounts have been part of the negotiations for contract extension and new rentals in many cases. Top locations in shopping centres and retail parks as well as inner city sites are currently least affected. Here, interested firms are still waiting for vacant space to realise projects that have been in the pipeline for some time. Retailers are increasingly reporting that inflation-related rental increases will be difficult to finance, and it will actually be necessary to accept compromises in certain cases to avoid cancellations.

Retail sales in Austria

€ 110 bill. € 100 bill. € 90 bill. € 80 bill. € 70 bill. € 60 bill. € 50 bill. € 40 bill. € 30 bill. € 20 bill. € 10 bill. € 0 bill.

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022p 2023p 2024p 2025p

Stationary turnover (gross)

Online turnover (gross)

Source: Action, NKD, TEDi

Sustainability

On the move towards greater sustain- ability

has resulted from the sharp rise in energy prices. It can be assumed that guidelines, or at least recom- mendations, for lower temperatures in shopping centre selling areas and retail outlets will be issued before the start of the winter season. A reduction of the lighting periods for storefront windows appears to be a further logical step.

Calls for an improvement in the sustainability of real estate are also becoming more important for the retail segment. The market has started to follow a trend that is much more advanced in office proper- ties and residential construction. Eco-certification, for example, receives greater attention in these areas than in retail properties. The most important driver for change is the EU Tax- onomy, which requires the inclusion of ecological and social criteria (ESG goals) in financing decisions. In other words, financing for properties with below-aver- age performance in this context will be more difficult to obtain and more expensive. The framework will include new construction as well as financing for expansion, refurbishing and modernisation projects. What makes this even more important is the fact that most real estate investments represent improvements to existing properties. The EU Taxonomy not only covers debt financing but is also directed to institutional investors, which means a property without corresponding ecological standards (and, optimally, the necessary certifica- tions) will be less attractive as an investment target. For this reason, value growth in these properties will tend to be impaired. This trend is clearly visible in the actions by many relevant market players who now only make investments if the defined sustain- ability criteria are met. Measures to reduce energy consumption currently play a central role in sustaina- bility efforts due to the increased focus on costs that

"Sustainability and the reduction of energy demand is becoming a key topic for shopping centres and shopping streets."

Actions to improve energy efficiency can only be effec- tive over the longer term, but they are even more important today because of the need to reduce energy consumption. Modernisation projects will be increasingly coupled with better-quality insulation and/or efficiency improvements to heating systems – and the costs for this retrofitting can only be seen as challenging. Land usage has become another important issue and, to a significant degree, also involves stand-alone properties (supermarkets, building materials markets) and single-storey retail parks. For existing properties, this means evaluating the use of roof space and, in part, parking areas for photovoltaic equipment. The current scenario of constant high energy prices over the long-term makes this a reasonable busi- ness decision in many cases, especially in connec- tion with e-charging stations for customers. Even more extensive restrictions for the new construc- tion of retail parks and stand-alone supermarkets

Sustainability

can be expected over the medium-term. Ecological criteria have come to play an increasingly important role in location decisions. Restrictions on private transport in major cities – keyword: parking permits – and high fuel prices are now a significant negative factor for conventional sites that can only be reached by car. Shopping locations close to consumers, for example on the ground floor zones of apartment complexes or in centrally located shopping centres and streets, have an advantage here.

SCS-Manager Zsolt Juhasz: "We need to make climate protection our top priority and, more than ever, intensify our efforts in this area."

Westfield Shopping City Süd

Sustainability measures have had high priority for the Westfield Shopping City Süd (SCS) for many years as part of its “Better Places 2030“ initiative. The huge photovoltaic plant on the roof areas is particularly spectacular: With a current annual production of up to 2.6 million ki- lowatt hours, it is the largest system of this type on a shopping centre roof in Europe. The new, covered connecting passageway from entrance area 5 to the Badner Bahn railway station makes public transportation more attractive and was also used for the installation of photovoltaic equipment - which produces roughly 155,000 kilowatt hours of electricity per year. Further projects are now in planning for the coming year. The initiative “Too good to go“ is a combination of ecological and social sustainability. The many restaurants and food stores in the SCS report surplus meals and food products via an app half an hour before they close, and these items can then be collected as “surprise packages” at sharply reduced prices. More than 5,000 of these packages were rescued during the previous year – which means nearly 13 tonnes of CO 2 were saved and, at the same time, financially weaker visitors had an opportunity to purchase high-quality food at particularly low prices.

On Top Living

With its “ON TOP LIVING“ housing concept, IMMOFINANZ is now joining the fight against land consumption. Plans include the evaluation of possibilities to overbuild the generally single- storey STOP SHOP retail parks with sustainable and affordable apartments. This will take place without further ground sealing because no addi- tional space is required for construction, and there will be no need for new access roads or parking spaces. The apartments – which will be built in modular wood construction – will offer high living comfort and also be climate neutral. In addition to large- scale photovoltaic equipment, heat recovery systems and the use of geothermal energy, future residents will also have access to e-charging stations and e-bikes. Another positive effect: Construction will be even more cost-effective because there are no added costs for land.

More Space for Fitness Fitness studios were the big losers in the corona cri- sis – for logical reasons. Long lockdowns and online training that materialised almost in an instant led to doubts as to whether branch with its conventional membership system would be able to recover in the foreseeable future.

the corner of Tuchlauben at a top location near the Golden Quartier.

The “fitness studio around the corner“ is also en- joying greater popularity: This type of fitness studio is normally found in 150 to 200 square metres of space and is positioned as a local fitness provider with solid, low-cost offers. The segment includes CircleGym, which made a very successful start this past spring at a location on the Baumgasse/ at the corner of Landstrasse in the third district, which was brokered by EHL, and is now looking for additional locations in many other districts. Since close proximity to potential customers is particularly important for these studios, ground floor space in newly built apartment complexes is also interesting.

These doubts have since disappeared, and the fitness chains have returned to an expansion course. Concerns that former customers would not return have been generally unfounded. Quite the contrary: The drive to exercise again after the involuntary pan- demic break has led to brisk business in the studios. In 2021 and the first months of 2022, they were one of the largest customers for space. The FITINN fitness studio chain was responsible for the largest new rental in Vienna’s inner city this year. At a top inner city location on Laurenzerberg/at the corner of Schwedenplatz, the former FRANK’S steak restaurant will be transformed into roughly 1,150 squarer metres of studio space. This confirms the trend towards increased space by the larger fitness temples, but these companies are currently not setting the tone for growth in the branch. The largest momentum is currently emerging in concepts with smaller branch outlets. Included here are highly specialised chains with customised offers for a clearly defined target group. One example is the young, upcoming Austrian dance cycling studio “SuperCycle“, which focuses primarily on young adults with a lifestyle-oriented combination of clubbing music and fitness. SuperCycle opened its first branch this year in the Kleeblattgasse/at

Workout with dance floor feeling

Size doesn‘t matter: Special offers like disco spinning in small areas at top locations are the key to success for Vienna’s “SuperCycle” fitness chain.

©© TIKEDEAi

The Discounters‘ Hour

comparison with earlier contracts. The increasing diversity of discount concepts is a positive trend for owners because it creates a demand for different sized space and location quality in this market segment.

Economic weakness and phases of rapidly rising inflation traditionally lead to an increase in market shares for discounters. The combination of these two factors in 2022 has, therefore, created a favourable environment for both food and non-food discounters to expand their branch networks. Retail parks are the major beneficiaries in rural areas, while locations previously reserved for the mid-price segment have become the focal point in cities. This is true for shop- ping streets as well as shopping centres. Particularly noticeable is the strong growth in retail parks, where the number of discounters has increa- sed steadily since the beginning of the corona crisis. Food discounters, above all Hofer and Lidl, and non- food chains like Action or TEDi are now the largest tenants based on rented space. The discounters‘ strong focus on expansion and high space productivity have also been reflected in a readiness to accept rents for prime locations that were previously directed to tenants in the hig- her price segments. However, the current market situation frequently requires price reductions in

The direct road to success

The concepts developed by non-food discounters may be very different in detail, but they have one thing in common: The road to success taken by Action, KiK, NKD, TEDi and their fellow market players reflects a strict orientation on the best possible price and the best possible value for money. There are no costly add-on services, for example online, and, more than any other retail concept, full concentration on offline retailing. Not least because of this focus, discounters are currently following an aggressive growth course and intensively looking for vacant space at attractive locations – in contrast to the branch rationalisation that currently characterises the activities of very large chains.

Discounters - number of branches

350 300 250 200 150 100 50 0

Action

NKD

TEDi

2017

2018

2019

2020

2021

2022 (p)

Source: Action, NKD, TEDi

Facts and Figures Vienna city centre

Selling space city

205,400 sqm

Sales space per resident

0.11 sqm 145 sqm

Ø Shop size

Share of retail chain branches

37.9 %

Vacancy rate

4.5 %

Fluctuation rate

13.2 %

Source: Standort + Markt 2021/22

The Retail Market in Vienna

Asymmetrical developments

Discounters capture good locations

Developments in the Austrian capital city of Vienna reflected the difficult situation on the international and national markets. However, the negative effects on vacancy rates and rental prices differed by location and submarket. Prime locations have recorded the comparatively best performance. There has been an above- average return of space, even in the “Golden H“, but numerous interested firms plan to use the opportunity to settle in a top location – not necessarily at historically top prices, but still at very impressive square metre rents. In the luxury segment, the recovery of city tourism has had a positive effect – even if the increase was lower than hoped for due to the absence of Russian visitors.

At less prominent but nevertheless good locations, the structural change is moving in a different direc- tion. The traditionally strong textile branch is faced with shop closings and space reduction, also by the leading retail chains. They are increasingly being replaced by discounters which are no longer focused on low-cost locations – also in Vienna – and have be- come an integral part of the tenant mix. One typical example is the large “Action” shop which opened in the Bahnhofcity at the West Railway Station during August and took over the space vacated by two textile retail branches. Vacancy rates are rising at secondary locations in the districts close to the city centre – a normal happening in challenging market phases – but a growing number of interesting expansion opportunities have appeared

Retail space (in sqm) and vacancy rates (in %) in Vienna`s high streets

250,000

18 % 16 % 14 % 12 % 10 %

200,000

150,000

8,5 %

8,9 %

8 % 6 % 4 % 2 % 0 %

100,000

4,5 %

3,2 %

50,000

Innere Mariahilfer Str.

City

Landstraßer Hauptstraße

Favoritenstraße

Vacancies

Retail

Retail-related

Vacancy rate (in %)

Source:

2021/22

Pan-European footfall analysis (high streets / day)

56,900

LONDON

Regent Street

1 2 3 4 5 6 7 8 9

PARIS

Avenue des Champs-Elysées

45,500

37,400

BARCELONA

Passeig de Gràcia

MUNICH

Theatinerstraße

36,400

COPENHAGEN

Ostergade

30,900

28,200

DÜSSELDORF

Königsallee

COPENHAGEN

Amagertorv

24,300 24,100

ROME

Via dei Condotti

VIENNA

Kohlmarkt

21,600 21,500

Mixed mass-market to luxury Luxury

LONDON

King‘s Road

10 11 12 13

ROME

Via del Babuino

19,000 18,800

MADRID

Calle Serrano

LONDON

New Bond Street

15,100

Source: BNP Paribas Real Estate

in the peripheral urban development areas. Included here are classical local suppliers like supermarkets and drugstores, but the close proximity to potential tenants and the absence of dominating market players create good starting conditions for gastronomy, services, doctors’ offices and smaller specialty shops.

consumers from travelling to peripheral shopping centres. Using public transport for shopping in the city has, consequently, become an attractive alternative because an increasing number of retailers are offering high-quality delivery services that solve the potential problems with package transport.

Parking permits have little effect

Rents in the top high streets

In March 2022, the City of Vienna extended mandato- ry parking permits for nearly all areas within the city limits up to 10pm – but the uproar was much less heated than expected. This new regulation has, however, not led to any major changes in shopping behaviour. The changes are more a result of the sharp rise in fuel prices, which has prevented numerous

Net rent EUR /sqm/month

Kohlmarkt

300 - 600 180 - 400 150 - 350 50 - 130 45 - 160

Graben

Kärntner Straße Rotenturmstraße

Innere Mariahilfer Straße

Neubaugasse

50 - 120 Source: EHL Market Research | Q3 2022

Impact of the COVID-19 crisis on retail trade EU-27, development of retail volume according to product groups, January 2020 to March 2022

160

140

120

100

Mail orders & internet

Fuel

Department store

Non-food (except fuel)

Total retail trade Food

Computers & telecom. equipment Textiles, clothing & footwear

Source: Eurostat/BNP Paribas Real Estate

Shopping Streets Vienna

Vienna | Mariahilfer Strasse

New lettings Mariahilfer Strasse 2021/22 (excerpt)

MUMOK

MuseumsQuartier

Meeting zone Pedestrian zone

Leopold Museum

Mahü 10 –18

Cosmetics

Luggage

Aesop

Samsonite

Optics

Mister Spex

Gerngross

Fashion

Kult

Confectionery

Optics

Lindt

Off-Price-Retailer

Half Price

Westbahnhof

IKEA

Austria’s premiere shopping street, the Mariahil- fer Strasse between the Inner City and the West Railway Station, is currently in the midst of an accelerated structural transformation. At roughly 15%, the turnover rate lies at the upper end of the range and is clearly above the average for Austria’s major shopping locations. The share of fashion and clothing retailers is declining (for example, the Benetton flagship store recently closed, and Peek & Cloppenburg reduced its rented space from six to five floors), while gas- tronomy is becoming more important. In addition, the construction of the “MaHü 10-18” project at up to EUR 400 million on the site of the former Leiner furniture store will fundamentally change the character of the section close to the city centre. A positive factor here is the substantial investment in the improvement of space.

In spite of all this restructuring, the vacancy rate is very low. Standort + Markt recently registered 3.2%, one of the best levels among the leading shopping areas in Austria. The massive “MaHü 10-18” project and the construction site for the future U3/U2 hub in the Neubaugasse are currently a source of obstacles for passers-by but will significantly increase the attractiveness of the Mariahilfer Strasse over the mid-term. Improved accessibility via public trans- portation, in particular, has become an increasingly important issue as the result of municipal actions to reduce motor vehicle traffic (meeting areas, extension of parking permit zones). Rents are declining slightly in line with the general market trend. In mid-2022, prime rents equalled EUR 130 to 160 per square metre.

Shopping Streets Vienna

Vienna | Inner City

New lettings Inner City 2021/22 (excerpt)

The Inner City is not only one of the most impor- tant retail and gastronomy locations in the Aust- rian capital but also the top spot in Vienna. These distinguishing factors create optimal chances for successful recovery from the currently very difficult situation. The luxury segment has proven to be relatively crisis-resistant, and the city centre has been the big winner following the end of most of the corona-related restrictions. The expansion of parking permit zones and short-term parking periods has hit other locations much harder, and potential follow-up tenants are ready and wating for vacant retail space – at least at the especially prestigious locations. A number of construction projects are expected to make shopping even more attractive. After the successful traffic calming measures on the Roten- turmstrasse, St. Peter’s Square (close to the Gra- ben) will be revitalised and landscaped by 2023, and extensive revitalisation projects are planned for the recreational hot spot Schwedenplatz and the tourism magnet St. Michael’s Square. The positive outlook is also reflected in the de- velopment of space: The Inner City, apart from the outlying areas with their rapidly growing popula- tions, is the only district to see a notable increase in retail space. Market watchers traditionally concentrate on the “Golden H“ – the Kärntner Strasse, Graben and Kohl- markt – together with the Golden Quartier adjoining the Tuchlauben, an area that has since gained nearly equivalent status. The most important new rental here was at Kohlmarkt 4, where the luxury label Bul- gari took over roughly 180 square metres previously occupied by the Breguet watch manufacturer.

John Reed

FitInn

Goldenes Quartier

Bulgari

Stephans- platz

Haas Haus

Fitness

Luxury

Automobil/ E-mobility

Steffl

Food

Furniture

Moon- city Vienna

Hofburg

Mjam Market

Staatsoper

Natuzzi Italia

Meeting zone Pedestrian zone

Leder- leitner Home

pressure on prices. Rents have not fallen as sharply as in other locations, but historical highs have also not been reached. Peak rents at prime locations in the “Golden H“ equalled 600 Euro per square metre at mid-year in 2022.

With regard to rental price trends, the Inner City has been unable to completely escape the general

SCN – Shopping Center Nord Ignaz-Köck-Strasse 1 | 1210 Vienna 32,000 sqm

Retail Locations in Vienna and the Surrounding Areas

Q19 Grinzinger Strasse 112 | 1190 Vienna 15,000 sqm

STEFFL Department Store Kärntner Strasse 19 | 1010 Vienna 12,500 sqm

Goldenes Quartier Tuchlauben | 1010 Vienna 11,500 sqm

Ringstrassen Galerien Kärntner Ring 5-7 | 1010 Vienna 11,000 sqm

Lugner City Gablenzgasse 5-13 | 1150 Vienna 38,000 sqm

BahnhofCity Wien West Europaplatz 2-3 | 1150 Vienna 22,000 sqm

Auhof Center Albert-Schweitzer-Gasse 6 | 1140 Vienna 51,000 sqm

Gerngross Mariahilfer Strasse 42-48 | 1070 Vienna 31,000 sqm

Center Alterlaa Anton-Baumgartner-Str. 40 | 1230 Vienna 20,000 sqm

Riverside Breitenfurter Strasse | 1230 Vienna 22,000 sqm

Westfield Shopping City Süd Vösendorf Süd | 2334 Vösendorf 192,500 sqm

Westfield Donau Zentrum Wagramer Strasse 81 | 1220 Vienna 120,000 sqm

Shopping Resort G3 Gerasdorf G3 Platz 1 | 2201 Gerasdorf 70,000 sqm

Citygate Wagramer Strasse 195 | 1210 Vienna 17,800 sqm

Millennium City Handelskai 94-96 | 1200 Vienna 51,800 sqm

Gewerbepark Stadlau Gewerbeparkstrasse | 1220 Vienna 66,000 sqm

Kärntner Str.

Stadion Center Olympiaplatz 2 | 1020 Vienna 27,700 sqm

ZS Zentrum Simmering Simmeringer Hptstr. 96A | 1110 Vienna 21,000 sqm

The Mall Landstrasser Hauptstr. | 1030 Vienna 30,200 sqm

BahnhofCity Wien Hauptbahnhof Am Hauptbahnhof 1 | 1100 Vienna 23,000 sqm

1100 Columbus Columbusplatz 7-8 | 1100 Vienna 17,000 sqm

huma eleven Landwehrstrasse 6 | 1110 Vienna 50,000 sqm

Data and facts on the retail market in Graz

Retail space city

167,600 sqm

Retail space per capita

0.58 sqm 184 sqm

Ø Shop size

Share of retail chain branches

37.0 %

Vacancy rate Turnover rate

4.1 %

12.4 %

Source: Standort + Markt 2021/22

The Retail Market in Graz

Graz is the fastest growing major city in Austria: In the years up to 2030, the population is projected to increase by more than 10% from 291,000 to 325,000 – a trend that will also create structurally attractive perspectives for the retail trade and the market for retail space. This is even more impor- tant due to the status of the Styrian capital as a shopping location far beyond the local region. Its catchment area covers large parts of Styria and southern Burgenland. The Seiersberg shopping city with its 85,000 square metres of selling space plays a dominant role in shopping tourism from the surrounding area. Other market players include the shopping centres and

retail park clusters along the periphery, which consistently have a higher share of customers from outside the region than the highly diverse shopping landscape in the city centre.

"The catchment area of the retail location Graz includes a large part of Styria and southern Burgenland."

With 168,000 square metres of retail space, Graz is home to the largest inner city retail cluster in Austria after Vienna’s Inner City and Mariahilfer Strasse. More than 900 retail outlets give the city a top rank for this indicator. The prime loca- tions extend along the foot of the Schlossberg around the main plaza, Herrengasse and the well- known Kastner & Öhler department store in the Sackstrasse. The border to the south is formed by Jakomini Square (a secondary location), and the commercial area continues with Südtiroler Square and the Annenstrasse (a tertiary location) to the west of the Mur River. Despite the high quality and attractiveness of the retail offering in the city centre and very satisfac- tory frequency, there has been a steady downward trend in selling space in recent years. The decline equalled roughly 3.5% for the past two years and nearly 4% in the previous two-year period. This de- velopment is attributable to the reduction of space

Demography & the Graz economy

Graz is the second largest city in Austria with 291,000 residents and, with an increase of nearly 25% in the population since 2001, one of the fastest growing provincial capitals. Other important drivers for the retail market include the large catchment area which ranges from the southern part of northern Styria to southern Burgenland and into eastern and western Styria as well as shopping tourism from northern Slovenia and Croatia. The population is expect- ed to grow to roughly 325,000 by 2030, which would further consolidate and strengthen the city’s status as the most important shopping destination in the southern provinces.

in the fashion branch. The most recent closings included C&A on the Annenstrasse and Zara on the Eiserner Tor. In contrast, Salewa, Högl Shoes and Montblanc opened new shops in the city centre during 2021. The vacancy rate has remained low at roughly 4% for a longer period, and the turnover rate is also normally below average. The realisation of various traffic concepts will be an important factor for the future development of central locations. Plans for the construction of a two-line underground system have been side-lined, but far-reaching (and generally positive from the viewpoint of the retail trade and gastronomy) changes can still be expected which will lead to the extension of the boulevards. In particular, the design of the western section of the inner city (bet- ween the Herrengasse and the Mur River) will be

re-evaluated. A new pedestrian zone was establis- hed in the Schmiedgasse and more extensive areas will be created for bicycle paths and sidewalks as well as green areas and trees.

Rents in Graz

Location

Net rent EUR/sqm/month

Shopping streets prime locations Shopping streets secondary locations

92 37 50

Shopping malls

Source: Standort + Markt 2021/22

Retail locations in Graz

Shopping Malls 1 SC Seiersberg

Space

74,000 sqm 60,000 sqm 43,100 sqm 41,000 sqm 40,000 sqm 40,000 sqm 23,600 sqm 9,000 sqm 5,200 sqm 4,400 sqm 4,000 sqm 47,300 sqm 40,000 sqm 19,400 sqm 18,900 sqm 17,200 sqm 12,700 sqm 8,200 sqm 8,200 sqm 7,100 sqm 6,900 sqm 6,300 sqm

2 Center West

3 Murpark

ANDRITZ

4 Shopping Nord

5 Citypark

6 Kastner & Öhler

GÖSTING

Retail Parks 7 FMZ Graz Webling

GEIDORF

8 Shopping West 9 Arland Center

10 Center Ost

Herrengasse

ST. LEONHARD

11 AFZ Andritzer FMZ Retail Park Clusters 12 Webling

EGGENBERG

Jakomini- platz

GRIES

REININGHAUS

13 Seiersberg 14 Lauzilgasse 15 Puntigam 16 Andritz 17 Graz Nord 18 Eggenberg 19 Straßgang 20 Center Ost 21 Messendorf

ST. PETER

RAABA

LIEBENAU

STRASSGANG

PUNTIGAM

PRIME LOCATION

SEIERSBERG

Herrengasse, Hauptplatz, Sporgasse, Stempfergasse, Sackstrasse

22 Plüddemanngasse

Source: Standort + Markt Beratungsgesellschaft m.b.H.

Data and facts of the retail market in Innsbruck

Retail space city

115,500 sqm

Retail space per capita

0.88 sqm 162 sqm

Ø Shop size

Share of retail chain branches

39.3 %

Vacancy rate Turnover rate

2.4 %

12.7 %

Source: Standort + Markt 2021/22

The Retail Market in Innsbruck

The retail market in the Tyrolean capital was par- ticularly hard hit by the complete absence of tourists during the “corona years” in 2020 and 2021. The massive comeback in tourism, also outside the ski season (June 2022, for example, was the second strongest year in the past decade), has brought a number of positive impulses. Innsbruck, with its roughly 131,000 residents, has a rather modest home market compared with other provincial capitals. Tourism revenues and customers from the broader catchment area – large parts of Tyrol, apart from the eastern region, plus smaller areas in southern Tyrol – are, consequently, essen- tial success factors for the retail trade because of

Innsbruck’s very large stock of shops in relation to its size. For example: With nearly 115,500 square metres, Innsbruck has substantially more selling space than the more heavily populated Salzburg with only 72,000 square metres. In contrast to the trend currently visible in other Austrian cities, the selling space in Innsbruck even increased slightly in 2021/22.

"The strong tourism comeback opens up good prospects for the retail trade in the Tyrolean capital."

The prime locations in Innsbruck’s inner city extend over a street area of roughly one kilometre and in- clude Herzog-Friedrich-Strasse in the Old City as well as the neighbouring, trendier Maria-Theresien-Stras- se in the south. Selling space of 65,500 square metres at prime locations rank Innsbruck ahead of the much larger Graz. Similar to Salzburg, souvenir shops and gastronomy dominate the areas around the visitor hotspots like the Herzog-Friedrich-Strasse (with the Goldenes Dachl/Golden Roof), while local residents are more attracted by the offering further south in the Maria-Theresien Strasse with the estab- lished Kaufhaus Tyrol and Rathaus Galerien shopping centres. Along the periphery, the retail park clusters in the east and the CYTA shopping world in Völs are the most important locations.

Demography & the Innsbruck economy

Innsbruck has 131,000 residents, which make it the fifth largest city in Austria. The greater metropolitan area has a population of 300,000, and roughly 30,000 students and other persons maintain a secondary residence here. The purchasing power per capita in the province of Tyrol equals EUR 23,490. With approximately 1.6 million overnight stays per year, this city on the Inn River is the third most important destination for city tourism in Austria after Vienna and Salzburg, and the Tyrolian economy is more heavily dependent on tourism than all other Austrian provinces.

The very encouraging development of retail trade in the Tyrolean capital – at least up to the outbre- ak of the Ukraine crisis and the related economic distortions – is also reflected in improved indicators. The vacancy rate recovered surprisingly fast and declined noticeably after a temporary rapid in- crease during the corona crisis. With vacancies of only 2.4% (in other words, minus two percentage points versus the previous year), Innsbruck again ranks as one of the absolute top cities. The turnover rate has also returned to a below average level of 12.7%. A number of attractive new outlets opened during the past 12 months, including Swing Kitchen and Vero Moda. There were virtually no larger returns of space, contrary to other major Austrian mar-

kets, and the only closing was the BIPA drugstore branch on Bozner Square. The share of space oc- cupied by clothing retailers has not declined des- pite the general trend, but even increased slightly. It is higher than all other provincial capitals at 33% and only outranked by the share of textile outlets at Vienna’s prime locations.

Rents in Innsbruck

Location

Net rent EUR/sqm/month

Shopping streets prime locations Shopping streets secondary locations

100

Shopping malls

92 Source: Standort + Markt 2021/22

Retail locations in Innsbruck

Shopping Malls Space 1 Cyta Shoppingwelt 67,500 sqm 2 dez 65,000 sqm 3 Kaufhaus Tyrol 32,800 sqm 4 Sillpark 29,500 sqm 5 west 16,200 sqm 6 Greif Center 13,600 sqm 7 Rathaus Galerien 9,000 sqm

1 2 3 4 5 6 7 8 9

THAUR

HUNGERBERG

10 11 12 13 14 15 16 17 18 19 20 21 22 23

RUM

HALL IN TIROL

Retail Park Clusters 8 Neurum 9 Innsbruck Ost 1 10 Innsbruck West 11 Innsbruck Ost 2

REICHENAU

Maria- Theresien- Straße

87,600 sqm 41,100 sqm 21,900 sqm 8,400 sqm

HÖTTING

GEWERBE- GEBIET ROSSAU

A12

HÖTTINGER AU

WILTEN

VÖLS

INNSBRUCK- IGLS

A13

PRIME LOCATION

Maria-Theresien-Strasse, Herzog-Friedrich-Strasse, Pfarrgasse

Source: Standort + Markt Beratungsgesellschaft m.b.H.

Data and facts on the retail market in Linz

Retail space city

145,400 sqm

Retail space per capita

0.70 sqm 181 sqm

Ø Shop size

Share of retail chain branches

38.7 %

Vacancy rate Turnover rate

5.0 %

19.1 %

Source: Standort + Markt 2021/22

The Retail Market in Linz

Linz, as a retail location, benefits significantly from the economic strength of this central region in Upper Austria with its nearly 600,000 residents, which is the industrial base and headquarters for numerous successful corporations. The catchment area also includes other large part of the province which are optimally connected to this provincial capital via three autobahns (towards Salzburg, Passau and the Mühlviertel region). From a retail standpoint, Linz, together with the sur- rounding communities, is much more attractive than the neighbouring Wels. The inner city has an impres- sive 145,000 square metres of selling space (including

nearly 83,000 square metres in prime locations). The premiere location is the centrally situated Landstrasse with smaller extensions in the directly adjoining parts of the side streets. In contrast to the other larger provincial capitals, tourism revenues do not play a material role here. Sound development has also been recorded by the retail landscape on the periphery. The PlusCity with its 92,000 square metres is one of the largest shopping centres in Austria, and expansive retail park clusters like the Lenaupark in Linz can also be found in the surrounding communities of Leonding, Pasching and Traun.

Demography & the Linz economy

"Major projects in the centre provide for a lot of movement and above-average fluctuation."

The central section of the province of Upper Austria with the capital city of Linz is, after Vienna, the strongest economic region in Austria. The industrial boom in 2021 and the low dependence on tourism have been responsible for the currently above-average development. With roughly 207,000 residents, Linz is the third largest city in Austria, and forecasts point to an increase in the population to nearly 220,000 by 2027. Nearby cities like Leonding, Pasching and Traun are also registering strong population growth. In addition, Linz benefits from a densely populated, well-to-do catchment area that extends to Wels and Steyr.

It is remarkable that, in relation to the market size, substantially more retail projects have been realised and planned in Linz than in other large submarkets. In the inner city alone, the Linzerie (the former Arkade Taubenmarkt) recently underwent extensive refurbishment. Revitalisation is also planned for the nearby passageway (under a new owner and currently in the development phase). A further shopping centre at Schillpark (with a high- rise and underground garage) is currently in the de- sign phase. Its realisation would sustainably improve

the commercial area along the southern part of the Landstrasse. The LentiaCity in Urfahr near the Nibe- lungen Bridge complements the quartet of integrated, inner city shopping centres which are responsible for more than one-third of the inner city shopping space. The branch mix shows a large percentage decline in home furnishings (minus 8%) as well as an increase in short-term convenience suppliers (plus 10%). The share of the clothing segment (25%) is substantially lower than the average for primary cities (30%). The turnover of space has been high for many years and currently equals 19%. This represents one of the highest rates in Austria and reflects the many inner city projects and restructuring which inevitably lead to more frequent change. The current vacancy rate of 5%

reflects a moderate level. New openings include Hofer and KULT in the Linzerie, and Betten Reiter is starting at a new location (on the Graben). The closings were concentrated, above all, on fashion branches, among others from Palmers, Pimkie and Sequins.

Rents in Linz

Location

Net rent EUR/sqm/month

Shopping streets prime locations Shopping streets secondary locations

95 22 57

Shopping malls

Source: Standort + Markt 2021/22

Retail locations in Linz

Shopping Malls

Space

Der Einzelhandelsstandort Linz profitiert maßgeblich von der wirtschaftlichen Stärke des oberösterreichischen Zentralraums mit fast 600.000 Einwohnern, bedeutender industrieller Basis und Zentralen einer ganzen Reihe erfolgreicher Konzerne. Darüber hinaus umfasst das Einzugsgebiet aber auch wesentliche andere Teile des Bundeslands, die über die drei Autobahnen Richtung Salzburg, Passau URFAHR PÖSTLING- BERG

1 PlusCity

92,000 sqm

2 Passage Linz 22,500 sqm 3 Interspar EKZ, Industriezeile 17,000 sqm 4 Lentia City 16,000 sqm 5 Infra Center 13,100 sqm 6 Interspar EKZ, Wegscheid 10,500 sqm 7 Pro-Kaufland 9,500 sqm 8 Atrium City Center 8,000 sqm 9 Linzerie 6,000 sqm 10 Eurospar EKZ, Kleinmünchen 4,600 sqm

Landstraße

Bulgari- platz

Retail Parks 11 Lenaupark City 12 FMZ Trauner Kreuzung

LEONDING

10,000 sqm 4,300 sqm

Retail Park Clusters 13 Leonding

42,300 sqm 26,200 sqm 25,000 sqm 25,000 sqm 23,500 sqm 3,600 sqm

14 Lenaupark

KLEINMÜNCHEN

15 Urfahr

16 Pasching 17 Dornach

18 Trauner Kreuzung

PRIME LOCATION

Landstrasse, Hauptplatz

Proje

Source: Standort + Markt Beratungsgesellschaft m.b.H.

Data and facts on the retail market in Salzburg

Retail space city

71,600 sqm

Retail space per capita

0.46 sqm 116 sqm

Ø Shop size

Share of retail chain branches

29.2 %

Vacancy rate Turnover rate

6.6 %

12.5 %

Source: Standort + Markt 2021/22

The Retail Market in Salzburg

In contrast to the popular view – which is most likely influenced by the well-known shopping zone along the Getreidegasse/Judengasse – Salzburg is a relatively undersized retail location in compari- son with the number of inhabitants. The inner city areas, in particular, have a moderate 71,600 square metres of space, which rank this fourth largest city in Austria behind much smaller cities like Innsbruck and Klagenfurt. The low volume of retail space in the inner city is due, on the one hand, to the structure of the many historical buildings in the Old City, which is classi- fied as a world cultural heritage site. The size of the individual shops is substantially below average at

116 square metres and even lower at 110 square metres in prime locations. On the other hand, two mountains, the Mönchsberg and Kapuzinerberg, place strict spatial limits on construction in the Old City: The street has a length of 4.65 km with only 1.7 km of prime locations. However, the limited supply of space represents a positive factor for the secondary locations in Salzburg which perform significantly better on average than the city centres of other provincial capitals.

"Restrictive zoning leads to an undersupply of large modern retail spaces on the periphery."

Demography & the Salzburg economy

Restrictive zoning has also created a situation where shopping centres on the periphery have less space than in the capital cities of the other Austrian provinces. The Europapark, the largest centre by far, has been trying for years to obtain a permit for expansion of the current 50,700 square metres of rental space. These efforts now appear to be successful and will permit the creation of 8,500 square metres of additional shopping areas. The retail park cluster, including the Designer Out- let, in the neighbouring community of Wals-Siezen- heim also benefits from a transregional catchment area.

With its 155,000 residents, Salzburg is the fourth largest city in Austria. Population growth has been steady and moderate. The province of Salzburg ranks third in the country’s per capita purchasing power. The development of the local economy, in general, and the retail property market, in particular, is more heavily dependent on tourism than any other provincial capital (based on the population, it is one of the most popular tourism destinations in Europe). The sharp drop in the number of overnight stays and day visitors during the pandemic had a stronger negative influence on this festival city than Vienna or the other Austrian provincial capitals.

Salzburg’s strength as a tourism destination (approx. 3.3 million overnight stays in 2019) was

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