Retail

While the overall economic conditions remain challenging and many households continue to be cautious about spending, brick-and-mortar retail remains stable. Rising retail sales indicate that competition is increasingly concentrated on high-performing locations and attractive retail concepts.

Market Sentiment and Trends

Structural change in the retail sector is continuing, though it is unfolding in a more nuanced way than is often assumed. While the number of brick-and-mortar stores has declined in recent years, the Hannover region’s role as a retail hub remains intact. Rather, the retail sector is increasingly concentrating on larger and more economically viable locations. In particular, neighborhood retail locations and specialty retail centers continue to perform steadily, while pressure to adapt is mounting in certain downtown areas.

The challenges arise less from a fundamental lack of demand than from the transformation of retail concepts. Modern chain stores require larger, flexibly usable spaces with high visibility and good accessibility. Many existing properties, particularly former department stores, no longer fully meet these requirements and must first undergo extensive renovation or be repositioned.

Downtown Remains a Sought-After Retail Location

Hanover’s appeal is evident, among other things, in the arrival of the Spanish fashion brand Lefties, which is opening its first location in Germany in the former Galeria Kaufhof building. At the same time, SportScheck is making a targeted investment in an experience-oriented retail concept with a new flagship store on Georgstraße, thereby making a clear commitment to the downtown location. In addition, other national and international retail companies are considering setting up shop in Hannover, but are focusing their search almost exclusively on established prime locations.

Prime Locations Hold Their Ground

Rent trends underscore the increasing differentiation within the retail market. After prime rents had declined in recent years, they will stabilize in 2026 at around 150 euros per square meter. Average rents, on the other hand, continue to trend slightly downward. This illustrates that demand is increasingly concentrated in a few highly frequented downtown areas, while significant rent discounts remain necessary outside of the absolute prime locations.

Specialty retail locations and neighborhood retail locations are showing significantly greater stability. In particular, grocery-focused retail parks continue to benefit from steady demand and exhibit comparatively low vacancy rates.

Investment Market Environment

Following the significant market adjustments of recent years, net initial yields have largely stabilized. A prime yield of approximately 4.9% is expected for retail buildings in prime locations in 2026, and approximately 5.6% for retail parks. Thus, despite structural changes, the retail sector remains a relevant asset class for investors.

City Centers in Transition

The development of city centers in the coming years will be significantly shaped by the transformation of large-scale existing properties. Former department stores and traditional retail properties are increasingly being redeveloped into mixed-use districts where retail is complemented by dining, services, recreational offerings, or residential spaces. At the same time, owners are increasingly investing in the modernization of existing properties to adapt them to the requirements of modern retail concepts.

Examples from recent months show that Hanover continues to attract new retail companies. Therefore, the key factor for future development will be less the demand for the location itself and more the ability to provide suitable spaces for the next generation of retail concepts.

Outlook

Hanover, as a retail location, has good development prospects due to its high centrality, large catchment area, and continued strong demand from well-known retail companies. The transformation of the city center will continue, but in the future it will be shaped more by the renovation of existing properties than by new construction. Hanover thus remains one of Germany’s most dynamic retail locations, whose future depends largely on the successful further development of its real estate portfolio.