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Economic environment

  • Economy develops slower than in the previous year
  • German air traffic registers slight growth – but loses ground by international comparison
  • Retail trade – profits from strong economy
  • Catering and hotel business – upswing continues
  • Advertising business – digitalization drives growth
  • Parking – dependency on the customer structure
  • No final spurt on the stable Munich office market

Macroeconomic environment

Both national and international economic growth are crucial for an international air traffic hub such as Munich Airport.

Growth in the global economy in 2019 fell short of expectations of the previous year’s forecast and was already adjusted downward in the first quarter of the year. According to figures from the International Monetary Fund (IMF), the increase in global real gross domestic product (GDP) in 2019 totaled 2.9 percent. The growth rate is therefore at its weakest since the global financial crisis in 2008 and 2009.1

In the emerging markets, economic growth was weaker than in the previous year. In particular, the anticipated decline in the People’s Republic of China contributed to this substantially. In the course of the trade conflict with the USA, two thirds of US imports from China were impacted by special duties since September 2019. The growth rate in China was 6.1 percent and therefore 0.5 percentage points below the previous year’s level. The global effects of the coronavirus were still marginal in 2019. The situation in Turkey remained tense also. GDP growth fell to 0.4 percent from 2.9 percent the previous year due to the sharp rise in consumer prices of 14.9 percent.2

In industrialized countries, the economic situation weakened significantly owing to the downward trend in global trade. In the USA, the trade conflict with China led to continuing trade uncertainty, which impacted exports from the US in particular. Private consumption increased sharply again – following a weaker phase at the end of 2018/beginning of 2019 – and was able to counteract the fall in the growth rate. This was accompanied by an upward trend on the labor market, which was characterized, inter alia, by an increase in wages and a low unemployment rate. Growth in Great Britain is being negatively affected as regards export opportunities from a German perspective owing to the continuing uncertainty surrounding the impact of Brexit. This was evident from weak growth in corporate investments. GDP growth in 2019 amounted to just 1.3 percent, the same figure as the previous year. The labor market remained stable with an unemployment rate of 3.8 percent. Investment activity remains weak owing to increased uncertainty and lower growth expectations.2

Economic growth in selected destinations worldwide

In %

Economic growth of selected target countries worldwide in 2018 and 2019
GDP growth in 2018 and 20193

GDP growth in the eurozone was 1.2 percent for the year – a year-on-year decline of 0.7 percentage points. Apart from weaker growth in imports and exports, the trend on the labor market was positive. The ECB’s expansionary monetary policy underpinned the growth rate and counteracted the more modest growth generally. The slowdown in economic activity was particularly detrimental for member states that are dependent on the manufacturing sector. In contrast, private and public consumption generated impetus for growth in GDP. The initial fall in the unemployment rate slowed down again somewhat in the second half of 2019. The upturn in exports from the eurozone remained stable at 2.9 percent. Interest rates are at an all-time low owing to the expansionary monetary policy of the ECB.2

Economic growth in selected destinations throughout Europe

In %

Economic growth of selected target countries throughout Europe in 2018 and 2019
GDP growth in 2018 and 20194

The German economy experienced significantly weaker growth in 2019 overall than in previous years. Growth in GDP amounted to just 0.5 percent. Against the backdrop of increasing global uncertainty, such as Brexit, trade conflicts with the USA, and the cooling down of economic activity internationally, the export-dependent German economy is in a downturn. The downward trend of the previous two years continued in the main in industrial production also. Up to the end of 2019, production in manufacturing industries fell by 3.9 percent on average. Production in the area of energy supply also declined sharply, with the price of European emission certificates increasing significantly in the period under review. Growth in exports was also more restrained than in the previous year (+1.3 percent). In contrast, construction investment increased in 2019, continuing to be driven by the low interest rate (+3.9 percent). Existing capacity bottlenecks will prevent any further expansion. Private consumption also recorded a growth rate of 1.5 percent. This upward trend in consumer spending is being sustained by the favorable situation on the labor market (unemployment rate of 5.0 percent) and rising wage levels.5

The oil price (Brent) fluctuated between USD 53 and 76 per barrel. It reached its peak at the end of April 2019, before falling to around USD 67 per barrel at the end of the year.6

Economic environment Aviation

According to analyses conducted by the International Air Transport Association (IATA), global air traffic recorded significant growth again in 2019. The number of sold passenger kilometers increased globally by 4.2 percent; this growth rate was below the long-term trend of around 5.5 percent for the first time since the global economic crisis.7 In contrast, airfreight, measured in freight tonne-kilometers, fell by 3.3 percent. The reasons for this include weak growth and increasing tensions in global trade.8

The airports that are members of the German Airports Association (ADV) achieved moderate to declining growth rates on average in 2019. The commercial passenger volume rose overall by 1.5 percent. Aircraft movements came in at the previous year’s level (+0.1 percent). In line with global freight development, cargo throughput (total of airmail and freight excluding transit) fell by 3.2 percent. Munich Airport therefore posted above-average growth rates in 2019 in terms of passengers and aircraft movements, while growth in cargo was below the ADV average.9 Further explanations on this are included in the section «Aviation business».

In a global comparison, measured according to sold passenger kilometers, the Africa region was in first place with growth of 4.9 percent in 2019, followed by Asia/Pacific (+4.8 percent), and Europe (+4.2 percent).

According to information from the German Aviation Association (BDL), the German airlines performed below average compared with the rest of Europe. While the traffic performance of European airlines (measured in sold passenger kilometers) was able to keep pace with the global average (+4.2 percent) with an increase of 4.2 percent, German airlines posted a weaker result of +1.3 percent due to the insolvency of Germania. If it were not for this special effect, German airlines would have reached the European level at around +4 percent. Growth in Europe fell during the course of the year from 7.4 percent to 2.5 percent. The market share of German airlines in their home market reduced from 67 percent in 2012 to 55 percent in 2019. Reasons quoted by BDL in addition to airline insolvencies include the unfavorable cost structures of German airlines as well as the burden of the German air traffic tax.10

Similar to the German airlines, German airports posted slight positive growth overall (+1.5 percent passengers) and therefore came in below the global average of 3.0 percent. Following a positive start in the first half of 2019 (+4.2 percent), growth in passenger numbers declined in the second half of 2019 by 0.7 percent. Domestic traffic was particularly badly hit in this respect, contrary to intercontinental traffic, which remained stable in the plus range. Despite this development, BDL views the basis for domestic traffic as remaining stable in the long term.11

Following record delays the previous year, punctuality in European airspace increased by 5.7 percent in 2019 according to the IATA. There was, however, continued criticism of the high infrastructure costs. Fuel price trends were regarded as positive, falling by 10.6 percent.

In its current aviation report, the Federal Ministry of Transport and Digital Infrastructure examined 20 measures to deal with these requirements. It came to the conclusion that the objective of participation in global growth could not be achieved in full, even if all proposals in the portfolio were implemented. Consequently, a further delay in implementing these measures would fundamentally endanger the competitiveness of the German aviation industry. The main problem for German aviation is therefore not a lack of demand, rather not being able to satisfy demand with an appropriate offering.12

Economic environment Commercial Activities

Thanks to higher incomes and record employment, German retailers also recorded growth in 2019 according to the Federal Statistical Office, with an increase in sales of 3.2 percent to around € 544 billion. Growth in online retail was significantly steeper (2019: +8.5 percent), though smaller companies in particular are finding it difficult to overcome the challenges posed by digitalization.13

According to the German Retail Association (HDE), the retail trade is still doing well despite the deterioration in the overall economic situation. The favorable labor market situation and current wage development are being dampened, however, by the expectations of citizens with respect to the economy. Nonetheless, consumer confidence is still good.14 This trend is at odds, however, with the ifo Business Climate Index, which fell by 4.7 percentage points in 2019: However, the majority of retail companies surveyed still assessed the business climate for the next six months positively.15

According to the German Hotel and Catering Association (DEHOGA), the catering sector recorded a positive performance in 2019, for the tenth time in a row, and thus continued its upward trend. In the area of guest accommodation, too, revenue grew by 2.5 percent, which, when adjusted for price, represents a growth rate of 0.5 percent. With a nominal increase in revenue of 3.3 percent (real 0.6 percent), the restaurant trade also performed well. The catering sector was likewise able to increase revenue by 4.0 percent (real 1.9 percent ).16

In fiscal year 2019, the gross advertising expenditure of the advertising companies was on a par with the previous year at € 32,593 million. The advertising category used primarily at Munich Airport is out-of-home advertising. The gross advertising expenditures in this area increased by 13.1 percent compared with the previous year.

Shifts in the modal split, which reflects the manner in which passengers who live in the catchment area of Munich Airport travel to the airport, as well as changes in the number of visitors relating to passengers from Germany and abroad, had different impacts on the Parking segment. In particular, the «shared mobility» business (rental cars and car sharing) profited from increased passenger volumes. Displacement effects to other methods of traveling to the airport were offset in terms of sales by a price increase, parking transactions in higher-value product categories, as well as higher revenues from other transportation operators.

Economic environment Real Estate

The City of Munich remains an attractive market for office property despite a 21 percent drop in floor-space turnover. Overall, a floor-space turnover of 770,400 square meters (2018: 979,300 square meters) was achieved in 2019. All of the size categories were impacted by the decline.17

Market developments are still shaped by the limited space availability. The vacancy level increased year on year from 410,600 square meters to 489,400 square meters, though this had no impact on the underlying situation regarding the shortage of space. With 218,100 square meters of available space, the City of Munich recorded a vacancy rate of just 1.3 percent.17

The average rent for office property in Munich exceeded the € 20 threshold for the first time; at € 20.10/m2, this represented an increase of 6 percent. In comparison to this, the average rent in the region around Munich fell by 4 percent to € 12.30/m2. Meanwhile, the prime rent also exhibited this upward trend, increasing by 10 percent to € 39.50/m2.17

In the real estate market, modern office space in prime locations remains in short supply and potential tenants are having difficulties sourcing suitable premises. A continuing increase in rental prices is the logical consequence of this. Of the 415,500 square meters of office space completed in 2019, more than 97 percent was already occupied by the end of the year. In addition, of the around 300,000 square meters due for completion in 2020, around 77 percent has already been rented or is owner-occupied. An increase in the vacancy rate, which would allow a fundamental change in market conditions, is therefore not expected.17

1 International Monetary Fund, World Economic Outlook, October 2019 and January 2020

2 German Council of Economic Experts, Annual Report 2019/20, December 2019; International Monetary Fund, World Economic Outlook, January 2020

3 International Monetary Fund, World Economic Outlook, January 2020

4 International Monetary Fund, World Economic Outlook, January 2020

5 ifo Institute for Economic Research economic forecast, December 2019; German Council of Economic Experts, Annual Report 2019/20, December 2019

6 onvista website, January 2020

7 IATA, Air Passenger Market Analysis, December 2019

8 IATA, Air Freight Market Analysis, December 2019

9 ADV, ADV monthly statistics 12/2019, February 2020

10 BDL, Annual balance sheet 2019, February 2020

11 BDL, Annual balance sheet 2019, February 2020

12 Aviation Report of the Federal Ministry of Transport and Digital Infrastructure, May 2017

13 HDE, press release, November 2019

14 HDE, press release, September 2019

15 ifo Institute for Economic Research, Business Climate Index for Germany, December 2019

16 DEHOGA, Annual balance sheet press release 2019, February 2020

17 Colliers International, press release, January 2020

German Airports Association (ADV)
The umbrella organization of all passenger airports in Germany, Switzerland, and Austria. The organization works to promote Germany as a strong and competitive center of aviation.

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