Lack of Retail Sales in German City Centers – Suburbs and Surrounding Areas Benefit

Retail sales in German city centers remain below pre-pandemic levels, finds a recent study conducted by the ifo Institute for the Berlin, Munich, Hamburg, Stuttgart, and Dresden areas. “In March 2023, private spending in the city center was still 5% lower than in 2019. At the same time, residential areas and suburbs recorded strong gains in sales,” said Oliver Falck of the ifo Institute. Consumer spending rose by up to 30%, particularly in areas where many people could work from home.

These results are based on aggregated and anonymized retail sales data provided by Mastercard as well as on small-scale data about employees’ potential to work from home collected by infas 360 on behalf of the ifo Institute.

“Since the pandemic, almost 25% of employees have been working from home at least one day per week. They also do more of their shopping where they live. We expect this change in shopping behavior to persist,” says Carla Krolage of the ifo Institute, one of the study’s coauthors. Much like post-pandemic real estate prices in the US, this distribution resembles a donut with a hole in the middle. The latest analysis shows that this shift in consumption is especially prevalent on weekdays.

However, retailers were able to regain market share from online shopping last year. In the summer of 2022, online sales accounted for 21.2% of private consumer spending, a reduction of more than 2 percentage points compared to the previous year. The trend toward online shopping was brought to a halt after the pandemic.

“The pandemic has had a lasting effect on the world of work and people’s shopping behavior,” says Falck. “A lasting increase in remote working and online shopping as well as small-scale changes in consumption make it all the more critical for city centers to adjust their concepts to the new normal and become more attractive.”

The study looked at retail spending data from Mastercard SpendingPulse, which measures in-store and online retail sales across all payment types, and Mastercard Geo-Insights, which leverages anonymized and aggregated sales activity in the Mastercard network to understand local spending patterns, across the five metropolitan regions. This information was provided to the ifo Institute for the purposes of this project. In addition, the study used representative, microgeographic survey data on remote working collected by infas 360.