TOM 12 2023

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Page 13 GUEST CONTRIBUTION December <strong>2023</strong> Trade is change, politics (too often) standstill Guest article by lawyer Niklas Langguth (law firm Langguth & Burbulla, Dusseldorf) The insolvency of Galeria Kaufhof was the final, momentous stage in a development that began with the Hertie insolvency several years ago and was announced much earlier. To date, there has been no comparable replacement for the loss of department stores, which were often the mainstay of city centers. In recent years, it has been possible to fill most of the Hertie vacancies with new concepts. This in itself has proven to be a challenge. This makes it all the more important to find promising and sustainable solutions within a reasonable period of time. The problem In the case of the Galeria insolvency, it is possible to draw on the experience gained from the revitalization of the Hertie stores. However, department stores are very individual locations and properties with commercial and real estate law problems that have often developed over decades. Accordingly, these properties can only rarely be restructured using a template. And where the commercial and legal aspects are usually difficult, there is a further problem: as a rule, these are locations that shape the district, and the municipal policy requirements for urban development are correspondingly high and varied. The developer‘s dilemma Niklas Langguth Project developers are often caught in a dilemma here: even an initial rough draft for the development of such properties involves considerable investment. If the developer then approaches the local authority with such a design, there is a high risk that the design will be disliked, torpedoed or discussed over several rounds. On the other hand, local authorities often do not feel compelled to embark on urban land-use planning on their own, despite the corresponding mandatory tasks. In these cases, it is possible to find out about the city‘s planning intentions. In this constellation, all too often something can only be initiated if an investor drafts a restructuring scenario at high risk, knowing full well that his design is unlikely to come to fruition and that a competitor may end up benefiting from the impetus if a planning process gets underway and is often only completed years later. The failure of many local authorities The problem with this constellation often lies in the inertia and inactivity of local authorities. A brownfield site the size of a department store in the best inner city area is an urban planning disaster that creates an urgent need for planning. The local authorities are not only entitled, they are legally obliged to comply with this planning requirement (Section 1 (3) BauGB). The fact that this obligation is not enforceable because it is not legally enforceable against third parties often leads local authorities to ignore the legal obligation. The excuses are manifold, particularly popular and often heard: local authorities cannot afford it. One wonders: a local authority that does not see itself as capable of forward-looking planning even in the narrowest inner city area has obviously given up its urban planning will. Only when an investor appears on the scene do most local authorities begin to think seriously about their urban planning ideas. This usually leads to extensive discussions and arguments between the council factions until there is nothing left of the investor‘s design. Only then does the city start a planning process, but it often comes to a standstill again when the investor leaves in frustration. Then the game often starts all over again with a new investor. What the local authorities overlook is that times have changed. When the Hertie bankruptcy had to be overcome, online platform retail took its first steps. In the meantime, online retail has taken substantial market shares from bricks-and-mortar retailers. A city center location is no longer a guarantee that an investor will take the risks that such a location entails and wait patiently until the municipality has finished its discussions. At the same time, business taxes from city center retail are generally a significant proportion of municipal revenues. If a solution is not found quickly for the derelict site, the remaining inner-city retail trade could be damaged along with the department store and, in the worst case, become deserted. Unlike 15 years ago, the local authorities do not have time to wait until, after several attempts, an investor comes up with an idea that suits all political groups. If the local authorities want to design their city centers effectively in the current situation and preserve city center retail, they will have to become active in planning. And they will have to do this themselves, as they are legally obliged to do so anyway. You almost want to shout to the local authorities concerned: Do your job!
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TOM 12 2023

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