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Left: GfK Visitor Frequencies. Credit: GfK. Right: Filip Vojtech, expert in retail as well as fashion & lifestyle for GfK’s Geomarketing solution area. Credit: GfK

Decentralization and the future of retail in German city centers

As if retailers in German city centers have not had enough to contend with in recent years–primarily driven by growing competition from online retailers–now they are also confronted with even bigger economic problems due to the Corona pandemic and the associated restrictions and closures. A continuous analysis of visitor development by GfK shows what has actually happened since the start of the pandemic, who the losers and even bigger losers of the pandemic are, and what the future holds.

By Filip Vojtech

According to an analysis of GfK Visitor Frequencies since the start of the Corona pandemic in Germany and a comparison with average visitor numbers in 2019, the roughly 340 city centers surveyed can be divided into three performance classes depending on the extent of the visitor decline: As expected, there are no winners because all city centers are losing a massive number of visitors as a result of the crisis. The hardest hit are major cities with over 500,000 residents, all of which count among the biggest losers. They faced the highest percentage decline in visitors compared to 2019: Minus 61 percent in the first lockdown, minus 65 percent in the second lockdown, and still minus 24 percent in the summer of 2020, i.e., between lockdowns one and two and during a period without hard restrictions. 

Largest cities with highest decline in visitors 

The main reason for the large decline in visitors is the change in the daytime population. Typically, significantly more people commute into the major cities each day than commute out, so the population increases during the day. The most prominent example of this is Frankfurt am Main, with around 760,000 registered residents but a daytime population of over one million people–before Corona, of course. Office workers represent a large share of the increasing daytime population in large cities. Since the pandemic, however, they often work from their home offices and visit downtown much less frequently. They now do their brick-and-mortar shopping after work nearby their homes, which is often decentralized or even located entirely outside the major cities. 

At the same time, this effect leads to more solid visitor frequencies for the more robust group of city center locations, which has seen the smallest decline in visitors and is predominantly composed of cities with fewer than 100,000 residents. This group performs best in comparison, but still struggled with declines of minus 41 percent in the first lockdown, minus 49 percent in the second lockdown, and still minus 10 percent in the summer of 2020.

The midfield consists mostly of city centers in communities with populations over 100,000. The decline in visitors here were minus 49 percent in the first lockdown, minus 56 percent in the second lockdown, and minus 15 percent in the summer of 2020.

A closer look reveals some peculiarities in the individual performance groups: Of Germany’s 15 largest cities, Duisburg has the lowest daytime population increase–and is therefore the only one that is not among the biggest losers. Conversely, some downtown locations of smaller communities are also on the list of the biggest losers, such as the city center of the VW city of Wolfsburg, or Ingolstadt with company headquarters of Audi and Media-Markt-Saturn, but also Passau, Siegen or Erlangen.  

The largest city within the group with the smallest decline in visitors is Gelsenkirchen, with a population of around 260,000 and more outbound commuters than inbound commuters. Other larger cities include Halle (Saale), Pforzheim and Trier. This group is otherwise dominated by smaller cities with populations of fewer than 100,000, such as Gera, Dinslaken or Schweinfurt. The latter is a positive surprise, as Schweinfurt’s city center shows a robust visitor trend in the GfK analysis, although the city has a daytime population that is 62 percent higher than its reported residents. In advance, this would have led to the assumption that the city would turn out to be one of the biggest losers. 

Medium-sized cities will benefit in the long term

It is a fact that the German population commutes less to the inner cities due to the Coronavirus pandemic. Since many companies are setting up permanent home office solutions for their employees, this will not simply be reversed once the pandemic is over. This means that residential areas, decentralized infrastructures and, last but not least, medium-sized and possibly even small towns will become more relevant in the long term. Accordingly, retailers should review and replan their strategic store locations, while investors, banks, and project developers should revisit their investments and portfolios.

The question remains as to how the recovery of city centers and pedestrian zones will develop after the pandemic as a whole. The developments in 2020 could provide some valuable insights. After all, there was a noticeable relief of the crisis after the first lockdown and, as a result, the most extensive easing of restrictions in the summer of 2020. Inner cities have gradually recovered during this time, with medium-sized cities again performing better than large cities. In July 2020, Lübeck and Koblenz, for example, had even recovered above pre-Corona levels in terms of visitors. At least, most major cities made it back to about 80 percent of pre-pandemic levels.