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Retail Meccas: Berlin

Germany’s largest city and long the nation’s center of cool, it’s only in the last few years that Berlin has advanced into the major retail leagues.

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Germany’s largest city, the federal capital and long the nation’s center of cool, it’s only in the last few years that Berlin has advanced into the major retail leagues for both national and international fashion players. For countering Berlin’s metropolitan allure are the city’s relatively high unemployment and fairly low disposable income levels, a polycentric structure with not only two major city centers but innumerable neighborhoods with loyal customer bases — not to mention a notorious disregard by Berliners citywide for displays of money-related status.

This story first appeared in the May 20, 2013 issue of WWD.  Subscribe Today.

Yet there’s no doubt about it: Berlin retail is flourishing, thanks in large part to the city’s seemingly nonstop tourist boom, which last year generated an estimated 20 million to 22 million overnight stays.

“Berlin retail lives from tourists,” commented Christoph Scharf, head of retail in Germany for BNP Paribas, who further noted the city’s positive trend is “international in character. The Berliners themselves didn’t believe it. Others powered it.”

Key store openings are a weekly occurrence, particularly in and around Kurfürstendamm in the old west, which is having a high-caliber renaissance after interest moved east in the post-Berlin Wall years. While the east’s luxury activity on Friedrichstrasse is cooling down, Engel & Völkers reported that in April, footfall between Französische Strasse and U/S-Bahn Friedrichstrasse outpaced Berlin’s most well-trafficked street, Tauentzienstrasse (which is the lower extension of Ku’damm).

The trendy Hackescher Markt, also in the east’s Mitte area, is still going strong with big name brands, and Nicolas Jeissing, director of Engel & Völkers Commercial, expects rents there and on Friedrichstrasse to remain stable at 120 and 170 euros a square meter per month, respectively, or about $172 to $244 a square foot annually.

Demand in the city center west, however, has pushed and is expected to continue to push monthly rents up from 200 to 210 euros a square meter ($287 to $300 a square foot annually) on Ku’damm and 250 to 260 euros a square meter ($360 to $374 a square foot per year) on Tauentzienstrasse.

Berlin had some catching up to do, and prime rents are just now approaching the prices of other major German cities.

However, if it’s still less expensive to get into the game here, especially for luxury labels, they also don’t necessarily make the same turnover, suggested Andreas Kogge, national director and team leader of retail leasing for Jones Lang LaSalle in Berlin.

“Berlin is not Munich. It doesn’t have the Arab tourists who come to the city for medical treatment with their entire families” and designer-shop their time away. “A Maison Louis Vuitton wouldn’t happen in Berlin,” he stated, but quickly added, “though who knows?” Vuitton, which recently closed its Friedrichstrasse door, operates one stand-alone store on Ku’damm and a shop in KaDeWe, but nothing on the scale of its new 14,000-square-foot digs in Munich.

Nonetheless, Berlin’s international draw remains unbeatable — on all market levels. The H&M concept & Other Stories is setting up shop both on Ku’damm and in Hackescher Markt, while Primark, which launched in Steglitz in the west, will open a second door on Alexanderplatz in the east. As the realtor and consultant company Comfort summed it up in its 2013 Berlin City Report, “No retailer of any significance at all can afford not to be present at this location.”

When Giorgio Armani opened its first Berlin door on Ku’damm last year, the designer brand chose to adapt the look of its Roppongi Hills store in Tokyo for the first time in Europe.

“Mr. Armani sees Berlin as cutting edge and wanted to give the city something special,” said Fabio Mancone, global head of communication and licenses for Armani. As for Berlin’s style, “There’s an intellectual sophistication to the look here. People aren’t interested in showing off, so Giorgio Armani is a good fit.”

“Berlin is big. It’s international. And it has a lot of energy,” remarked Bruno Guillon, chief executive officer of Mulberry, which also opened its first Berlin store on Ku’damm last month. The British brand said it expects to profit from the city’s high tourist flow, but also aims to create a long-term relationship with Berliners through actions like its opening collaboration with Berlin artist Frank Hülsbömer.

Indeed, the arts connection remains a prominent Berlin attraction. As Patrizia Pepe’s ceo, Claudio Orrea, said at the brand’s opening on Ku’damm last fall, “Berlin for us is important — for the heart. Which is why we’ll host young artists and purchase their works — to help them grow.”

DEMOGRAPHICS

Population: 3.544 million (November 2012)
Population change, past year: +1.1 percent
Purchasing power: 18,220 euros, or $24,358 in 2011
Key industries: Tourism, government, services, creative industries, Internet start-ups, research and technology
Number of malls: 39 within Berlin’s city limits; five outside Berlin’s city limits (approximately 18.6 miles)
Malls in development: Four within city limits; two outside city limits
Other major construction projects: Berlin Brandenburg Airport

HOT SPOT: KURFURSTENDAMM

Otto von Bismarck’s answer to the Champs-Elysées, Kurfürstendamm, or Ku’damm as it’s nicknamed, has witnessed many a cultural and commercial high point in its more than 125 years. The materialistic window of West Berlin in the city’s divided years, the fall of the Wall transferred much of this designer shop-studded street’s allure to the newly accessible east. Bottega Veneta’s large-scale entry on Ku’damm’s prime tip near Leibnizstrasse in 2011, however, signalled an active upscale resurgence.

Last year saw the arrival of Giorgio Armani, Dolce & Gabbana, 14 oz., Brunello Cucinelli, Philipp Plein, Strenesse, Escada, Peuterey, A.P.C., Maurice Lacroix, Boggi Milano, Patrizia Pepe, Witty Knitters, The Corner (West), Filippa K, Urban Outfitters and Boggi Milano as well as reopenings for Saint Laurent and Diesel on and off the avenue. So far in 2013, Apple, Mulberry, Dimensione Danza, & Other Stories and G-Star have opened there, with Hugo Boss slated to arrive later in the year and labels like Acne and RL shopping for suitable slots.

“Many luxury brands said yes, we need Berlin on our world map. And it must be Ku’damm,” said BNP Paribas’ German head of retail, Christoph Scharf. Ku’damm, noted Escada ceo Bruno Sälzer, is one of the world’s 10 most recognized shopping streets, which spurred the brand’s return there last year. World War II bombs and imprudent reconstruction mean the boulevard’s coveted “Altbau,” or prewar buildings, are scarce, but plans for a David Chipperfield revamp of the now-empty Ku’damm Karree shopping passage, a possible sale of the Maison de France, as well as the renovation of Bikini House and further development around Bahnhof Zoo means there’s room for further expansion in the years to come.

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