Corona Crisis: Can German City Centers Be Saved?

The future of the center of Bocholt, a town of 71,000 inhabitants near the Dutch border in western Germany, will be decided here, on the main corner of the shopping district. It’s a recent Tuesday morning, and not much is going on this early in the day. Ludger Dieckhues, the city’s marketing manager, is standing in the middle of the pedestrian zone wearing jeans and a button-down shirt. To the left, where the weekly market is filling up, all is well. To the right, though, are just empty shops. “The retail area we once had here will never return,” he laments.

Back in 2006, Bocholt’s city center had a 0 percent vacancy rate. Then came the Lehman bankruptcy, the global financial crisis and the online retail boom. And now, the novel coronavirus. It all adds up to a problem for Dieckhues: 12.9 percent of the 300 or so storefronts in the city now stand vacant. He fears this is the beginning of the end. “At some point, part of the downtown area will start to slip.”

Bocholt isn’t alone. City managers and mayors across the country are wary of a potential downward spiral, concerns shared by trade federations and the Association of German Cities. With one vacancy following another, formerly attractive areas are losing their shine. The boom in online trade has made many city centers in Germany less alluring. Is the pandemic about to finish them off?

Galeria Karstadt Kaufhof, the large department store chain, is closing dozens of stores around the country. The fashion retailer Esprit is shutting half its stores and H&M is also making deep cuts. Women’s apparel retailer AppelrathCüpper is in the process of going into receivership. Hallhuber, which also sells women’s fashion, is already there. And Gerry Weber, another retailer focused on women, is undergoing restructuring. Chains that used to lure people into the city center are hardly worth anything anymore.

The German Retail Association (HDE) is expecting 50,000 closures and a 40-billion-euro loss in turnover. Restaurants are also having severe difficulties earning enough to pay high city-center rents. DEHOGA, the German hotel and restaurant association, estimates that 70,000 businesses may close. “Corona has pushed forward the development by years,” says Burkhard Jung, president of the Association of German Cities.

Badly Affected by the Crisis

In contrast to American or Asian cities, European city centers have always been the focus of trade and exchange. Church, town hall, marketplace – that is how most European cities are structured and it has become familiar to all who live on the Continent.

Places like Hamburg, Munich and Stuttgart will always remain shopping cities. Mid- to large-sized German cities like Münster and Essen aren’t threatened yet. But what about smaller ones like Peine and Fulda, Wanne-Eickel and Lingen? And what about those unwilling exhibitions of bleakness: small-town pedestrian zones crammed with dime stores, tattoo studios and hairdressers grouped around a single ice cream parlor?

Thus far, German mayors have tended to turn to marketing in an effort to attract more people to the city center. With retail moving online, entertainment, cultural events and good food became the primary selling points. And it worked for quite a while. “The restaurant industry was seen for a time as a future substitute for the weakening stationary non-food trade,” says Julian Nasiri, who works for real-estate consultant JLL, which helps redevelop city centers. For years, his figures show, restaurants and catering grew, primarily at the expense of clothing retailers.

Now city festivals, concerts, markets and shows are being cancelled en masse while restaurants and bars are generating fewer revenues. Who wants to go into the city for a cappuccino with a mask? “It turns out that the food business isn’t the new apparel, after all,” says Nasiri.

Even shops that have managed to gain a foothold online are being badly affected by this crisis. Up until just a few weeks ago, for example, the Frankfurt entrepreneur Joachim Stoll was considered a retail visionary. He realized way back in 1998 that the great era of the pedestrian zone would end before too long and he took his family’s suitcase-and-leather-goods business, of which he is the fourth generation to manage, online.

For years, turnover rose, sometimes by up to 30 percent a year. The company’s flagship store in Frankfurt’s main shopping district also profited. In 2017, Stoll had revenues of 10 million euros for the first time ever and it looked as though his business acumen was being rewarded. He continued to innovate, reprogramming his online shop in an effort to access new target groups via social media channels. But then, his most important supplier, the Cologne-based suitcase producer Rimowa, was sold to the luxury goods company LVMH and conditions for retailers like Stoll worsened. His revenues began to shrink. “And now corona,” he says. “Nobody can travel anymore, and nobody needs luggage.”

It’s About Identity

The number of visitors to his website has plummeted, even as the company still has to keep up with the cost of maintaining its sales portal and other expenditures. His brick-and-mortar business is in dire straits as well. “If I didn’t own the building, I likely would have closed it down by now,” Stoll says. He is considering selling the whole thing and focusing on providing online retail services to others. “Business won’t recover before 2022,” he says.

When it comes to city centers, though, more than just turnover is at stake. It’s about identity, about the very heart of the municipality. That makes what Roland Wölfel, who has spent 30 years consulting mayors on how to manage their town centers, has to say all the more astonishing. “Many simply don’t care about the issue,” he says. “They think: Things took care of themselves for the last 30 years. But if that’s the mindset, they’ll erode by themselves as well.” What cities need, he says, is a mixture of different uses: Living space, office space, shopping and dining. He believes that is the future.

There are, of course, places that are doing all they can to save their city centers – some of them with more conservative ideas and others with creativity. In the northern Bavarian town of Ebermannstadt, for example, which has a population of just 6,917 residents, the mayor hired a manager for the city center and launched a startup contest called “StadtUp,” a play on the German word for city (Stadt). The best business idea stands to win the equivalent of 60,000 euros in goods and services supplied by local companies. The result: The small town now has a half dozen new companies.

In Schweinfurt, another city in Bavaria, local retailers reacted to the crisis by joining forces and establishing their own online platform. They set up a partnership with a cargo bike manufacturer in town and a delivery company, enabling them to guarantee same-day delivery. “Corona has had quite an effect,” says city manager Thomas Herrmann. “Otherwise, the project likely would never have materialized.”

Marburg and Bayreuth, meanwhile, have had positive experiences with vouchers or with tax-free allowances supplied by employers, redeemable in city-center shops. Since early June, more than 200 municipalities have been sharing their ideas on the web platform die-stadtretter.de.

Calls for Financial Assistance

In the state of North Rhine-Westphalia, meanwhile, the government has launched a 70-million-euro city-center program explicitly to help cities purchase empty storefronts and enliven them. It isn’t entirely clear, however, how such storefronts might be used.

“It’s not so important what they do with them. The main thing is for decision-makers to come together and come up with a joint strategy,” says Thomas Krüger, an expert on city center development at HafenCity University in Hamburg. The shopping street in Hamburg, for example, has benefitted from a business improvement district, a public-private partnership concept which involves property and business owners paying mandatory dues, out of which security personnel or additional street cleaning services can be paid.

But the model is currently running into difficulties. “In hard times, just when such initiatives and upgrades are badly needed, it often doesn’t work,” says Krüger. The owners simply don’t have the money available.

The situation has become so bad in many places that mayors have begun calling for even more financial assistance from federal and state governments. Many municipalities aren’t even able to cover their share of a fund designed to improve city centers, Association of German Cities President Jung complains. “As such, we are demanding that 90 percent of the contributions come from the federal government or from state governments in the future,” Jung’s organization is also asking for a billion euros to help city centers.

The demand from the German Retail Association seems almost modest by comparison. Association head Stefan Genth has requested 500 million euros from the Interior Ministry to develop ideas for city centers. The paper, which DER SPIEGEL has seen, is rather remarkable. The Retail Association is no longer just interested in improving the shopping experience and creating more retail space. Rather, the fund is aimed at completely redesigning town centers. “We don’t want cookie-cutter city centers that only exist for retail,” Genth says. He says that this is “the greatest opportunity for city-center restructuring since World War II.”

Still, not everybody is prepared to abandoned retail as a city-center driver. Michael Volland takes huge steps as he strides through his shop on the main shopping street of Hannover, though “shop” is perhaps not exactly the right term. Called Vaund, it is more like a miniature trade show. Right in the heart of the pedestrian district, the showroom has a light-colored hardwood floor on which are numerous islands of dark stone. Those islands are used to present high-priced products from premium labels: toasters from Smeg, a television from Metz, Teufel speakers, aluminum luggage from Aleon, Pelikan pens, an easy chair from Paul Lindberg and a 1973 Porsche 911. New products are introduced every three to six months. Customers are able to examine the products and then buy them in the shop, online or somewhere else entirely. Volland doesn’t particularly care where. After all, he merely rents his 700-square-meters (7,500 square feet) of designer space to the producers whose products are on display. His eight employees provide customer consulting and are trained directly by the manufacturers. “Premium brands in particular have a problem,” Volland says. “Their products are unfortunately all-too-frequently defined only by price, because adequate consultation isn’t available.”

“We Will Have Lost the Race”

The Messe Berlin, the German capital’s trade fair center, has invested in Volland’s shop and two to three more of them are set to open this year, despite the coronavirus. The project is modeled on b8ta in the U.S., which has been running for five years and operates 20 such showrooms. “Stationary retail can do much more than it is currently demonstrating today,” says Volland. “Before city centers die, residential space is certainly an alternative. But that shouldn’t be the goal.”

It is also possible that lively city centers have an altogether different advantage: less crime. That, at least, is what Dietrich Oberwittler believes. He conducts research into crime, security and the law at the Max Planck Institute in Freiburg and his office isn’t far from one of the focuses of his research – the shopping street in the heart of Freiburg. “Crime is primarily dependent on how mobile people are,” Oberwittler says. A dead shopping street could lead to the deterioration of a neighborhood. Petty crime like purse-snatching or shoplifting does increase in crowded areas, he allows, but violent crime isn’t as common in places where lots of people are out and about. “Cafés can have a greater effect than a police officer. When people are sitting outside, it leads to a kind of social control.” Oberwittler is currently planning a study together with the state criminal police office in his home state of Baden-Württemberg to determine if there is a connection between vacant store fronts and crime. The idea is to overlay anonymized location data from mobile phones in the state with criminal offenses recorded by the police. “Through the lockdown, we have a unique opportunity to see what happens when city life evaporates,” Oberwittler says.