“The merger of department store chains Karstadt and Galeria Kaufhof creates new opportunities to make many smaller and medium-sized city centres more attractive and bring their pedestrian zones back to life. For decades, department stores were magnets on shopping streets, and they can become so again,” says Eckhard Brockhoff, Managing Partner at Brockhoff & Partner.

Meeting this challenge requires investment in existing properties and creative approaches to retail assortments. Building improvements can make the interiors more attractive. Product ranges and their presentation need to be optimised in many locations to compete with specialist shops. The presence of beloved brands and renowned labels can significantly increase a department store’s appeal. There is no one-size-fits-all solution: every city and shopping street needs individual assessment and a tailored concept.

“I clearly see the strongest demand for space in the basement, on the ground floor and on the 1st floor. In larger cities, there is also demand on the 2nd floor. The floors above could be put to creative uses, for example by logistics companies whose space requirements continue to grow, particularly because of the expansion of online retail,” says Brockhoff. He entered the property industry more than 30 years ago by marketing retail units and now leads one of Germany’s leading owner-managed real estate companies. His publication, “Der Brockhoff”, which analyses German city-centre retail, is widely recognised across the industry.

“Of course, we must recognise that some cities will not have capacity for one or even two department stores. Creativity and openness are needed to repurpose properties that are generally in very good locations,” says Eckard Brockhoff, who has already demonstrated a successful solution. In Essen, he bought the former Karstadt/Hertie building, demolished it with two partners and built an attractive commercial property on the same site, which he continues to hold. The ground floor is now home to Aldi, dm, Deichmann and TV chef Nelson Müller, while Edeka has opened in the basement. More than 500 people now work in highly modern offices on the upper floors.

Overall, the department store merger has the potential to provide new momentum for city centres amid the uncertainties currently under discussion. This could revitalise smaller and medium-sized cities in particular, where concerns about the decline of retail are strongest.

Last week, the competition authority cleared the merger of Karstadt and Galeria Kaufhof. It found no competition concerns. Rather, it is the continued growth of e-commerce that physical retailers need to prepare for.