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Declining sales, online competition, and the bankruptcies of
the Praktiker and Max Bahr chains – 2013 was anything but
an easy year for the DIY sector. Yet investors signal resurgent
interest in this type of property. How does this add up? This
first edition of Market Report Retail that Redos Real Estate will
publish on a quarterly basis in collaboration with BBE Retail
Consulting and IPH Retail Property lets you take a closer look
at the retail segment of DIY stores.
DIY stores are looking back on a turbulent past as investment as-
sets. Once trading at gross rent multipliers of 12 to 13.5 times on
a comparatively tranquil market, DIY properties began to change
hands more rapidly in a rash of sale-and-lease-back transactions
during the years 2006 and 2007. Driven by the market entry of for-
eign investors, prices suddenly skyrocketed in 2005 and 2006, be-
fore investors lost interest on the market just as quickly. Then came
2013, and with it the blow the market was dealt by the insolvency
of Max Bahr and Praktiker.
As always, however, the setback implied the opportunity of trying a
fresh approach. The good news being: The DIY sector is undergo-
ing a metamorphosis. With the market shake-out duly completed,
investors take a favourable view of the segment again. I‘m inclined
to agree with them, as I do see plenty of opportunities for the indus-
try in 2014. The collapse of Praktiker turned out to be – admittedly
with some delay – a wake-up call for retailers and investors both.
As far as I can see, the market has been cleansed by the Praktiker
bankruptcy. The cards are being reshuffled by the retailers, and
market shares are being redistributed. Rather than marking their
territory through a price battle, though, the remaining retailers have
for some years now prioritised customer service and specialised
assortments – a move well received at the customer end.
Now it is up to the investors to quickly find new tenants for the
former Max Bahr and Praktiker venues. Any viable option is worth
considering: both the continued use as DIY stores with new
tenants, and potential reutilisation alternatives. With a cost price
of approximately 600 to 1,000 euros per square metre of lettab-
le area, DIY properties are several times cheaper than other retail
property types, and thus present low-cost entry opportunities to
investors. At the same time, DIY stores often pay handsome re-
turns, more so than supermarkets, for instance. Gross rent multip-
liers have meanwhile rebounded and stabilised on a level of around
13 to 14 times, provided the investment asset is situated in a good
location and let to a solvent tenant. Ample reason for investors to
commit or recommit themselves in this market segment.
DIY Stores Rekindling Investor Interest
EDITORIAL
realestate
Focus: DIY Stores1I2014
in cooperation with
Market Report Retail Trade
Jointly published by Redos Real Estate together with BBE Retail Consulting and IPH Retail Property
Market Report BBE/IPH
2
In its latest survey of DIY store struc-
tures, the Gemaba Society for Mar-
ket and Business Analysis counted a
total of 2,198 DIY stores in Germany,
adding up to a gross retail area of
around 13,310 million square metres.
This implies a decrease in the num-
ber of locations by eight percent year
on year, while the retail area shrunk
by around seven percent. The reason
for the decline is the bankruptcy of
the Praktiker / Max Bahr chains, as
around 320 DIY stores went out of
business. Yet even though the total
number of stores has hit an eight-ye-
ar low, sales are higher than in previ-
ous years. Also striking is the increase
in retail area per store – this being a
trend that is likely to continue in the
future.
2014: Reshuffling Market Shares
and Floor Area Percentages
2013
2.198
Number of hardware and DIY stores
Retail area (indoor) of hardware and DIY stores (in million sqm) Source: gemaba
Source: gemaba
2.460 2.438 2.428 2.421 2.390 2.381 2.380
12,2 12,3 12,4 12,6 12,7 12,8 12,9
2006 2007 2008 2009 2010 2011 2012
Development of the DIY store sector in Germany
Sales totalling 18.06 billion euros, a year-on-year decrease by
2.9 percent, were reported by the BHB Retailers‘ Association for
Home Improvement, Building and Gardening for the DIY sector in
2013. Several reasons come to mind why the German DIY tra-
de was unable to match the sales performance of the previous
year in 2013. One one of reasons was poor weather at the start
of the year, which had a massive impact on sales, especially in the
gardening goods categories. Another event clearly impairing the
year-end result for 2013 was the bankruptcy of the DIY multiple
Praktiker / Max Bahr. The prevailing industry sentiment for the year
2014, however, is cautious optimism. While the sector as a whole
is unlikely to experience growth, some of the market players will
see their sales soar, or so the BHB believes.
18,6
2011 2012
18,71 18,6
2006 2007 2008 2009 2010
Gross sales of hardware and DIY stores (in bn €) Source: BHB
17,88 17,64 17,55 17,918,43
Development of the DIY store sector in Germany
2013
Upward Trend Checked in 2013
12,0
Market Report BBE/IPH
3
Online retailing, which has come to play a
very prominent role in other segments of
the retail trade, has had a negligible impact
on the DIY sector so far. This is unlikely to
change any time soon, as BBE estimates
the online share of the market to remain
between five and ten percent in the co-
ming years. For the sake of comparison:
The online share of the turnover in consu-
mer electronics retailing might rise to 35
percent during the same period. The slow
growth of online sales in the DIY segment
is not least explained by delivery issues, for
instance when it comes to live plants. Add
to this the elevated need for professional
advice. Any effort to make a difference in
the competition with e-commerce should
therefore prioritise a consistent expansi-
on of the sales and advisory services in
the stationary retail sector. Among those
market players who have already made a
name for themselves with their high service
and product competence are Obi, Horn-
bach, and toom.
OperatorNumber of former Prakti-
ker / Max Bahr sites taken over
Use
Bauhaus 27 DIY store
Hagebau 16 DIY store
Toom 12 DIY store
XXXLutz 12 Furniture store
Globus 8 DIY store
OBI 6 DIY store
Poco Domäne 5 Furniture store
Hornbach 5 DIY store
E-Commerce Poses Limited Threat
Interview with Björn Biermann
4
Björn Biermann is Head of Real Estate at toom Baumarkt, one of Germany‘s
leading DIY store multiples. Biermann‘s sphere of ownership includes the
departments Expansion and Construction, Energy Management, as well as
Contracts and Legal. He talked to us about the ramifications that the
bankruptcies of Praktiker and Max Bahr has had for the DIY sector, about his
company‘s plans to expand, and about forward-looking DIY store concepts.
Mr Biermann, how did the collapse of the Praktiker and Max Bahr
chains impact the industry?
With a view to the ongoing elimination of competition and the glutted
market, it is safe to say that the market consolidation was a good
thing for the industry, and had been long overdue. The industry is still
in the restructuring and repositioning phase that was initiated by the
insolvency of the two competitors. So it would be too early for any final
assessment of what the attendant market changes will bring. Import-
ant for us to know is that the bankruptcy of the Praktiker DIY chain
has done little to tarnish the reputation of the hardware and DIY store
industry in general. In the eyes of the customers shopping at hardware
and DIY stores, the bankruptcies are to blame on poor management
and a misguided pricing policy instead. These are causes that custo-
mers associate exclusively with the company at hand, and that they
do not consider an issue plaguing the DIY store sector as a whole.
What do you expect the future to bring for the former Praktiker
and Max Bahr locations? Could you quantify the percentage of
properties that face obsolescence?
The race for the premium locations was already decided in December.
We are quite happy with our final score: We secured 20 top locations
for our business. What we are after at this point is the strategic densifi-
cation of our network of branches. We assume that around half of the
former Praktiker / Max Bahr venues will find a buyer. The future of the
other sites will have to be settled outside the confines of this sector.
Site selection criteria play an important role here. And the willingness
of a given municipality to create new planning parameters also plays
a key role. I personally believe that most sites qualify for development.
What does the current expansion strategy in the DIY store seg-
ment look like?
It remains to be seen how the companies will handle the expansion
through takeovers in 2014. It will be important to position yourself in
the right regions with just the right layout concept. Purchasing power
and demographics play a key role. With roughly 350 branches in Ger-
many, annual capital expenditures in the double-digit millions, and a
focus on sustainable concepts, toom Baumarkt is active on the real
estate market in a number of ways: by reopening stores in the wake of
restructuring work, expansions, and upgrades, as well as relocations,
new branches, and the development of green buildings. Our focus in
this context is on signing long-term leases. We make a continuous
effort to tighten our network of branches by opening new stores, while
also closing local supply gaps, and optimally supplementing our exis-
ting branches.
Have you identified specific growth regions in Germany?
While being well positioned, we are aware that our network of bran-
ches is rather wide-meshed in Bavaria. So we aim for a greater density
there. At the same time, the focus will be on suburban areas and me-
tro regions. Rural regions will also remain interesting. Here, we want to
position ourselves properly for the long run.
What would you say are the decisive (locational) factors for a DIY
store‘s success? What factors enter into your decision in favour
of a certain location or against it?
Aside from key factors such as visibility and accessibility, we always
place a premium on proximity to the customer when we choose a
location. Beyond that, the structural quality of existing properties is
of paramount importance, because they need to be adjusted to our
standard concepts and our sustainability criteria in order to become
modern, state-of-the-art DIY stores. New venues opening today ex-
tend over 3,800 to 5,600 square metres, with spacious garden supply
stores of around 3,000 square metres in retail area annexed to them.
What sort of qualities should a DIY store have that is about to
open today?
In our day and age, sustainability factors naturally play a central role
for your choice of location. This is why toom Baumarkt invests conti-
nuously in the energy refurbishment of our portfolio properties and in
the construction of new stores. In fact, we have helped to raise the
5
Interview with Björn Biermann
industry standard: Our new DIY store in Nieder-Olm was the first to be
awarded a “Silver” certificate by the DGNB German Society for Sus-
tainable Construction when it was completed in 2012. In the two years
since, we added another three green buildings, located in Bebra, Lüb-
beke and Jülich, respectively. The green buildings are designed in such
a way that the day-to-day operations make frugal use of energy and
water as a natural resource. The use of smart technology for heating,
cooling and ventilating actively contributes to the reduction of green-
house gases and to the conservation of resources. Another mainstay
of our real estate strategy is the modernisation of portfolio property.
Above all, we focus on sustainable concepts for the use of heating and
electric power, as well as on investments in new and efficient lighting for
the stores. On top of that, all of the toom DIY stores operate to 100%
on green energy.
At the moment we are making an intense effort to reconsider our lay-
out concept because our sector cannot afford to ignore the online
business. Our long-term property strategy will primarily be defined by
questions of floor area size and transportation access. Apart from that,
the customer takes centre stage, of course. By fine-tuning our product
range and the associated service options, we want to not just motivate
shopper to keep coming back but intend to turn them into true fans of
our stores and our brand. We believe that this can be done through
our brand strategy and our services, e.g. as advisors in interior design
issues and as brokers of tradesmen services.
Redos Real Estate
Holzdamm 28 – 32
D-20099 Hamburg
Tel: +49 (0)40 42 93 23 – 0
Fax: +49 (0)40 42 93 23 - 18
www.redos.de
BBE Handelsberatung
IPH Handelsimmobilien
Brienner Strasse 45
D-80333 Munich
Tel: 089-55118-0
Fax: 089-55118-153
www.bbe.de
www.iph-online.de
Images: Redos, Obi, Toom