Retail Market Report | 2020

The Austrian Retail Market

Crisis yes, the end of the world no

by RegioPlan, 480 business locations in Austria are currently affected by ongoing or impending insolvencies. In the short and medium term, these developments will be reflected in all major sub-markets (shopping streets, shopping centres and retail parks) in the form of substantially higher vacancy rates. This will temporarily become a source of tenant bargaining power when renewing contracts and with new rentals and will exert pressure on rent levels. In the longer term, it will accelerate an adjustment of the market: space will be more quickly removed from the market in weaker locations and conversions will be carried out more consistently, even if they entail costs and permit only limited earnings potential. The increased surplus of space is therefore expected to remain a temporary phenomenon. Despite the problems, the mood need not be apocalyptic: domestic demand is proving to be the most stable economic factor by far, and the path returning to “normal shopping” has been embarked upon fairly quickly. State support measures (short- time work, hardship fund, increase in unemployment benefits, etc.) ensure a stabilisation of income, while a lower level of recreational spending due to cancelled vacations, cancelled events and fewer visits to restaurants are resulting in a greater proportion of household income dedicated to retail spending. In subsectors such as fitness centres, corona-related distancing rules even tend to result in additional space requirements.

After several years of a declining supply of space in Vienna and the provincial capitals, the corona crisis and lockdown hit the market in a phase which was pointing again to stabilisation and a slight recovery. The declining demand for space on the part of sectors with an above-average online share of total revenue was at least offset in 2019 and the first quarter of 2020 by increasing space requirements in other retail sectors, gastronomy and various service sectors (e.g. health and fitness). The crisis has caused a sharp reversal. A large number of landlords had to forego a portion of rents for economic reasons, regardless of legal obligations, and long-term consequences are now starting to emerge: plans for expansion have been put on hold everywhere, and there is an acceleration in the streamlining of branch networks and in branch downsizing. In addition, several insolvencies such as Dressmann, Stefanel and Runners Point are resulting in additional vacancies, and more will certainly follow in autumn and in 2021. According to a survey

Rents shopping centres and retail parks | Q1 2020 net rent EUR / sqm / m

Price trend

Prime location

40 - 120

stable

SCS, Donauzentrum, Auhof Center, etc. Secondary location Q19, Lugner City, BahnhofCity Wien West District centres

15 - 40

stable

8 - 14 slightly increasing

Retail parks Vienna

8 - 15 6 - 13

stable stable

Federal provinces

Source: EHL Market Research | Q3 2020