In recent years, in some German city centers, after the closure of branches of the Galeria Karstadt Kaufhof (GKK) department store group, it has been possible to revitalize the locations and their surroundings through creative reuse concepts. This is the result of a study that the trading consultancy BBE plans to publish later this month.
GKK filed for bankruptcy on Tuesday for the third time in just a few years. Of the former 300 branches, only about a third remain. During January, the company will close another 18 properties. The retail consultancy BBE has investigated what has become of former Karstadt and Kaufhof locations that have been closed in recent years. This also allows conclusions to be drawn about branches that could be affected by a closure in the future.
“Mixed uses are promising, for example, consisting of retail and restaurants on the ground floor, offices, co-working, medical centers on the floors above and hotels or residential on the top floors,” says BBE boss Johannes Berentzen. The freeing up of large areas in good locations is an opportunity for German city centers. In his opinion, positive examples, especially from a city perspective, include former branches in Recklinghausen, Osnabrück, Bonn, Augsburg, Hof and Leipzig.
Long vacancies in Rheine and Velbert
According to the study, there is an average of four to five years between the closure of a location and its new use. This is mainly due to the search for investors, usage regulations, approval procedures and necessary construction work. Renovating branches is often complex and core renovation is often unavoidable. The approval authorities are required here to provide pragmatic solutions for local retailers, good construction site management, but also flexibility on the part of landlords and subsequent tenants, says Berentzen.
In some cities, local entrepreneurs have participated in the development of reuse concepts. In Gelsenkirchen, after the former Karstadt/Hertie building was closed, local merchants, business owners, craftsmen and property owners came together, acquired the empty department store and converted it into the “Linden-Karee” with mixed use. Since 2015, in addition to retail and service offerings, there has also been a residential and care center.
A few examples show how it can work. There are now plans for reuse of the former Hertie branch in Velbert, which closed in 2009, but completion is not planned until 2027 – 18 years after its closure. In a previous location in Rheine, the “Quartier Staelscher Hof” with 100 hotel rooms and 44 apartments is scheduled to be completed in 2024 after 15 years of vacancy.
Former Kaufhof or Karstadt areas are also empty in other cities, for example in Hanover. One of the two most recently closed branches serves as an interim use, among other things, as a location for cultural events. At its peak, there were seven locations in the city, but one remains. According to Berentzen, it is not very promising if the new operators simply continue the old usage concept unchanged. “Old wine in new bottles doesn’t work under any other name.”
“Good opportunities for Munich, Hamburg and Frankfurt”
In 2022, the management consultancy PwC examined the development of 32 Karstadt or Kaufhof department stores that had been closed in previous years. Accordingly, a year after the closures became known, 72 percent of them had already made a decision about subsequent use. More than half of the department stores were converted or demolished. In half of the cases there was then a mixed-use concept.
Real estate expert Lars Jähnichen from the IPH Group expects that Galeria locations will be closed, especially in smaller and medium-sized cities, and that no more than 40 locations will remain. “Top locations such as Munich, Hamburg and Frankfurt continue to have good opportunities.”
From Jähnichen’s point of view, extensive renovation work is also necessary in these houses because the building structure, technology and concepts of the locations are often outdated. Despite high investment costs, he expects there to be enough interest. “Fresh, location-appropriate reuse concepts are necessary for the closed GKK branches, such as a mixed use of retail on the ground floor and residential, office or hotel on the upper floors,” says Jähnichen.
Cities want to be included in reuse concepts
It is important for cities and communities to quickly find follow-up solutions after the closure of department stores. So-called ghost construction sites or wastelands are unpopular because they prevent people from going into the city centers. “When reusing large department stores, it is important that a long-term usage perspective is demonstrated so that vacancies are avoided and negative effects on the attractiveness of inner cities are prevented,” said André Berghegger, General Manager of the German Association of Cities and Municipalities.
He calls for affected cities to be included in discussions between insolvency administrators and creditors from the outset to develop attractive reuse concepts. “However, affected communities must also be given improved legal and financial access to the real estate,” says Berghegger. The federal and state governments are required to optimize the framework conditions, for example in the municipal right of first refusal. (dpa)