German retail steadies, but consumers still hold back recovery

Stefan Genth, head of the German Retail Association (HDE), opened the Handelsimmobilien Congress in Berlin last week with a candid assessment of a sector holding up — but not breaking through. The central issue is not that consumers lack income, but that they remain reluctant to spend. German households, he argued, have the capacity to consume, but are choosing not to.

The numbers reflect that hesitation. German retail has seen no real growth for six years. Last year's 3% revenue increase was largely inflation-driven; the 2026 forecast of 2% points in the same direction. The savings rate remains high, and consumer confidence subdued. What makes this more striking is the international comparison: France, Spain and Italy face similar macroeconomic conditions, yet consumers there are returning more readily to shops and city centres. In Germany, the constraint is increasingly psychological.

This has direct implications for how the market is evolving. The divide between online and stationary retail persists, with online sales expected to grow by around 4.4% while physical retail lags. Yet Genth pushed back against a simple displacement narrative. Around 40% of stationary retailers are now active online, and the boundary between channels is becoming increasingly fluid. The question is less where sales take place than how seamlessly formats are combined. Even so, the underlying demand environment remains weak, and that continues to weigh more heavily on physical retail.

Competition pressures and the inner city

The sharpest part of Genth's address was reserved for competition from Asian e-commerce platforms, particularly Temu and Shein. He argued that these operators are generating an estimated €5bn or more in annual German sales while exploiting regulatory gaps around product safety, labelling and chemical standards. Citing test results, Genth said a large share of sampled products failed to meet EU requirements. These goods, he noted, are not typically sold to Chinese consumers but redirected to European markets. Attempts in France to block Shein have so far failed in court, but Gerth called for more decisive intervention at national level.

At the same time, pressures are building within the physical retail landscape. Around 5,000 store closures are expected in 2026, with each vacancy affecting not just retail performance but the wider functioning of inner cities. Shopping remains the primary reason for visiting city centres, and overall perceptions of safety remain relatively strong: 78% of respondents report feeling safe. However, nearly a third say their sense of security has deteriorated over the past year. This shift is largely subjective rather than driven by actual crime levels, but it is nonetheless real in its effect on footfall and consumer behaviour.

Investment market stabilising, not accelerating

For property investors, Genth's data points to a market that is stabilising rather than surging. Retail property transaction volume reached €6.5bn in 2025, up 2%, with twelve deals exceeding €100m. Food-anchored retail parks and specialist centres continue to attract the strongest interest, benefiting from stable demand and frequent customer visits — a degree of resilience absent in other segments.

The pipeline for 2026 is described as well filled, with expected transaction volumes of €6–7bn. Private investors and corporates remain the dominant buyers, and sustainability considerations are increasingly central to investment decisions, alongside asset quality, location and tenant structure.

The overall picture is of a sector that remains operationally intact but constrained by weak consumer momentum. Retail is not in retreat, and key formats continue to function. But until that hesitation eases, recovery will remain selective — favouring formats with essential demand and pricing power, while leaving more discretionary retail exposed.