Berlin Mega-Mall Shows Surging Retail Need: Real Estate

When Harald Huth bought the former Wertheim department store site in central Berlin, he planned to build a mall with 200 shops for about 400 million euros ($550 million). Three years and almost 1 billion euros later, hes set to open Germanys biggest shopping center, with 270 stores.

The developers growing ambitions reflect Berlins emergence as a shopping destination faster than new stores can be built. Retail rents in the capital climbed the most among Germanys big cities last year, driven by a surge in tourism and a growing population.

In the past 10 years, Berlin has developed excellently, Huth, 45, said in a telephone interview. The tenant demand we received gave me confidence that the project could be bigger.

Germanys biggest metropolis has been something of an emerging market in the decades of rebuilding that followed the fall of the Berlin Wall in 1989. Though Berliners incomes are still lower than the national average, the city is beginning to attract brands like Apple Inc. (AAPL) and Forever 21, which opened their first stores there last year.

Frankfurt and Munich and Hamburg are wealthier, but Berlin is on the ascendancy, said John Bason, chief financial officer at Associated British Foods Plc (ABF), the London-based company thats preparing to open its second Primark discount clothing store in Berlin. There are many, many consumers within the catchment area of Berlin, by far enough to give us crowded stores.

Berlin retail sales adjusted for inflation climbed 5.8 percent last year, according to the citys statistics office, compared with a rise of just 0.1 percent in Germany as a whole.

Retailers are drawn by the citys growth and emergence as one of Europes most visited cities, said Ruediger Thraene, head of Berlin at broker Jones Lang LaSalle Inc. (JLL)

Its been a lot more noticeable in the past two or three years that international labels want to open shops in Berlin, Thraene said. Berlin was a fashion hotspot in the 1920s and 1930s, but since the fall of the Wall a lot has had to happen for it to be in that position again.

Berlins reputation as a fashion destination has been burnished by the semi-annual Berlin Fashion Week trade show, which the government began organizing in 2007.

Berlins population has climbed 3 percent since 2005 to 3.4 million, about double that of second-placed Hamburg, and the government expects another 7 percent rise by 2030. The city had 11.3 million visitors last year, 50 percent more than in 2007, according to the Berlin Trade Federation. Visitors accounted for about a quarter of all retail spending, the Federation said.

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Berlin Mega-Mall Shows Surging Retail Need: Real Estate