Retail store chains invest while SMEs hesitate

Big retail store chains (with an annual turnover exceeding 25 million Euros) benefit significantly from the current economic revival and expect increased turnovers this year. As a consequence these chains plan to invest more in equipment and construction activities. At the same time staff is to be taken on. On the other hand, the majority of small and medium-sized entities (SMEs) adopt a pessimistic attitude with regard to their business development and want to reduce their investments. These are the findings of the ifo retail trade investment test study.

Financing difficulties due to the slack business in the first half of 2007 and unfavourable credit terms quite often are the reasons for which smaller companies are unwilling to invest. “As a matter of fact these companies should on the contrary invest right now in order to make still use of the declining balance depreciation method”, says Mr Manuel Birnbrich, polling expert at the Munich based ifo-Institut. In 2008 this possibility will no longer exist. Mr Birnbrich fears that many smaller retail store businesses will lose additional market shares to big retail store chains as a consequence of their investment stops.

Investment in retail store real estate is currently booming too. This fact is underlined by numerous inaugurations of and plans to build new shopping centres, most of the time in downtown areas of German major but also smaller cities. In general such investment projects are not carried out by retail store companies but by specialized project development firms. German and foreign real estate trusts expect high returns on investment on the German market for retail trade real estate due to promising consumption forecasts. More details are available on the internet. GERMAN