Montag, 8. Juni 2009

Karstadt's Cost Structure

A lot has been written about Karstadt's leasing arrangements with various investment funds (Goldman Sachs et al), and how the high rents allegedly bleed the company dry.

Not sure if that is correct, though:

According to this link, yearly rental payments amount to 323 m €.

And according to the interim financials, floor-space is 1.56 million sq.m., so average annual rent is 207 €/sq.m., or 17 € per month.

During the last financial year, Karstadt's revenues reached 4.1 bn €.

So total rental payments were 8 % of revenues.

Is that a lot?

It depends:

This article tells us that rents in good locations are up to 300 € per month in Munich. Frankfurt, Düsseldorf, Hamburg and Stuttgart also see top location rents above 200 €.

As for second-tier cities: Dresden and Leipzig cost you around 100 €, Potsdam only 45 € (says this link), and 60-100 € are charged in various mid-sized Bavarian cities (according to here).

In other words, Karstadt's 17 € aren't exactly excessive, far from it.

However, Karstadt has another problem:

Low revenue per square meter.

To illustrate:

- Karstadt's average annual revenues per sq.m. are 2,600 €

- Random googling shows that a mid-sized Salzburg shopping-mall reaches 8,000 € per sq.m.

In other words: It's hard to pay market rents if you have lots of "dead space" that doesn't sell much.

Still, if the above numbers are correct, I would argue that it can't exactly be said that Karstadt has to pay extortionary rents.


  1. I'm not into retail, but I figure that the 300€/sqm rent in Munich is for ground level square meters. For higher levels the rents should be substantially lower. However, 17€ still don't sound excessive.

  2. Yeah, I suppose it's for smaller stores that only rent ground level and possibly second floor (at least most of the stores in the Munich locations they quote use at least two storeys).

    I read somewhere that part of the problem of converting Karstadt department stores into shopping malls is that they tend to be five stories high, but most mall operators don't want to use more than three stories, because it's hard to get customers to go further up.

  3. Maybe Kaufhof pays still less...?

  4. According to the link below, the Kaufhof stores are owned by Metro's real estate division. No idea how much rent is being paid, but it anyway stays within Metro.