The owner of iconic Berlin department store KaDeWe has filed for bankruptcy, citing drastically increase renting costs. But analysts remain optimistic about the store's future.The retail group which owns the iconic Berlin department store KaDeWe and two other large luxury German shopping malls has declared bankruptcy, the corporation announced in Berlin on Monday.

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KaDeWe Group, part of the troubled Signa real estate empire, is 49.9% owned by Signa Retail, an Austrian-based property empire which itself filed for insolvency last year. The other 50.1% is held by the Central Group of Thailand.

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KaDeWe Group said "exorbitantly high rents" in Berlin, Hamburg and Munich "make it almost impossible to operate profitably in the long term."

Since the start of the pandemic rent has risen 37%, it said.

"There is no question that the group can have a strong future with normal rents," KaDeWe CEO Michael Peterseim added.

KaDeWe: a Berlin institution

KaDeWe, pronounced "kah-day-vay," is an abbreviation of "Kaufhaus Des Westens," which can be loosely translated as "department store of the West."

Its eponymous Berlin flagship, which opened on Wittenbergplatz in 1907, has become a major tourist destination in the German capital to rival the Brandenburg Gate, the Reichstag parliament building and the television tower at Alexanderplatz.

The group also includes the Oberpollinger department store in Munich and the Alsterhaus in Hamburg.

Petersheim said all three stores recorded high sales even in tough times.

Stores expected to continue operating

The head of retail consultancy BBE, Johannes Berentzen, estimated that rents for the KaDeWe Group amount to 13% to 20% of store turnover, depending on the location.

"For the majority shareholder Central, insolvency could be worthwhile in order to get out of the expensive rental agreements," Berentzen said.

"I am certain that all three stores will continue to operate," he added, stressing that luxury retail continues to perform well.

The head of the Berlin-Brandenburg Trade Association, Nils Busch-Petersen, said he is also optimistic about the store's future.

"KaDeWe is doing great," he told RBB. "And the insolvency means an effort to get out of contractual relationships that are toxic."

zc,mf/wmr (dpa, Reuters, AFP)

(The above story first appeared on LatestLY on Jan 29, 2024 11:00 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).