We'd like to say that this will be a grand flop, but history is not on our side.
Berlin, Europe’s fastest-growing tourist destination, is taking a page from Dubai as it expands retail for the hordes of visitors.
The Mall of Berlin, a 270-store complex opening in the city center today, gives the growing numbers of tourists who visit the German capital a new place to spend their money. Within a year, it’s set to become the country’s largest shopping center as 30 percent more space is added.
“It’s not really a mall, but a whole new city quarter,” said Andreas Kogge, head of Berlin retail leasing at Jones Lang LaSalle Inc. “The malls on the edge of the city will certainly suffer.”
Berlin is expanding its retail offering after opening dozens of hotels to keep pace with the influx of visitors. Like Dubai, the Persian Gulf sheikhdom that has the world’s biggest mall, Berlin’s growing reputation as a shopping destination is bolstering its economy.
The Mall of Berlin, built on the site of the former Wertheim department store a 5-minute walk from Potsdamer Platz, has about 100,000 square meters (1 million square feet) of shops in low-rise stone and glass townhouses that evoke the area’s prewar architecture. The developer, Harald Huth, plans to expand the mall by another 30,000 square meters next year.
“This will be the most successful mall in Germany because we built something special at an extraordinary location,” Huth said by phone. Tenants will include Guess, Karl Lagerfeld and Lacoste.
Emaar Properties PJSC, encouraged by Dubai’s retail boom, is selling part of its shopping-mall unit in the United Arab Emirates’ biggest initial public offering since 2007. The property company will probably price the IPO at the high end of the range, according to a term sheet seen by Bloomberg.
Retail sales in the German capital climbed 4.7 percent in June from a year earlier, adjusted for inflation, according to the city’s statistics office. That compared with a gain of 0.4 percent in the country as a whole.
Berlin’s economy expanded the most of all German states last year, after lagging behind the national average for more than a decade after reunification, helped by tourism, as overnight stays climbed 8.2 percent to 27 million. Visitors accounted for about a quarter of all retail spending, according to Berlin’s Retail Federation.
Drawn by the brightening economic prospects, retailers including Apple Inc., Primark Stores Ltd. and Uniqlo Co. Ltd. opened their first Berlin shops in the past 18 months.
The Wertheim department store that the mall replaces was destroyed during World War II. Two decades later, the Berlin Wall tore through the center of that area, creating a no-man’s land surrounded by barbed wire and armed guards.
After reunification, the property was the subject of a decade-long legal battle before Huth and London-based Arab Investments Ltd. bought the property in 2011 for about 89 million euros. At the time, it was the largest undeveloped site in central Berlin.
When he bought the site, Huth planned to build a complex with 200 outlets. He decided to increase the mall’s size — and his budget — to meet tenant demand, cementing his position as the city’s biggest retail developer.
Huth also built the Gropius Passagen, which until today was Berlin’s biggest mall. He’s also constructing a complex with 120 shops on the site of the former Schultheiss brewery in the Moabit district.
Berlin now has 40 malls, according to data compiled by Jones Lang LaSalle. That’s too many, said Frank Gohde, a retail property analyst at Berlin-based research firm Bulwiengesa.
“The shopping center segment in Berlin is tightly packed,” he said. “Every new mall comes at the expense of the weaker ones, and of those there are quite a few in Berlin.”
Bikini Berlin, a shopping center with designer boutiques and upscale restaurants and bars, opened in April in a landmark 1950s property overlooking the city’s zoo. Furniture magnate Kurt Krieger agreed to build affordable homes and a park around a former freight train station in the northern district of Pankow, in return for permission to construct the area’s biggest mall.
When the Mall of Berlin is expanded to 130,000 square meters of shops, it will replace Ruhr-Park in the industrial city of Bochum as the country’s biggest retail property. While it may be the largest mall in Europe’s largest economy, it can’t compete with Dubai on at least one count: like anywhere in Germany, there will be no shopping on Sundays.
Photo credit: Interior renderings of the Mall of Berlin. Mall of Berlin