Economic environment

Macroeconomic environment

The economy is recovering from the slump caused by the crisis

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

The global economy is slowly recovering from the Corona crisis. However, the effects of the coronavirus pandemic continued to weigh on economic development. In addition to the known containment measures, increasing supply and capacity bottlenecks have slowed global economic development since the beginning of the year. Global real gross domestic product (GDP) grew by 6.0% in 2021 (2020: -3.0%). The growth rate was thus 0.5 percentage points above the prior-year forecast.5)

In the emerging markets, the economy grew at an overall rate of 7.3% (previous year: -0.4%). Looking at individual countries, the economy of the People’s Republic of China recovered comparatively quickly from the crisis-induced slump and already reached pre-crisis levels in the early course of 2020. However, the Chinese economy was also hit by the effects of the crisis in 2021. The service sector was considerably restricted at times due to the pandemic. Industry was adversely affected by persistent shortages of intermediate products, temporary production stoppages in connection with locally rising infection rates, and power rationing in large parts of energy-intensive production. Overall, however, the growth rate for 2021 was a solid 8.1% (2020: 2.3%). India was also hit particularly hard by a new wave of corona infections in the spring. This slowed down the recovery of the Indian economy, which had been strong up to that point. The real GDP growth rate in India in 2021 was 7.4% (previous year: -6.9%).6)

Economic output in the industrialized nations recovered from the previous year’s slump and returned to its pre-crisis level for the first time in the third quarter of 2021. Overall, the advanced economies recorded a 4.9% increase in GDP in 2021. The U.S. economy grew by 5.5%. Private consumer spending made a major contribution to the economic recovery. The British economy even expanded at a rate of 6.6%. The main pillar here was the recovery in private consumption. Industrial production, on the other hand, was also adversely affected by global supply bottlenecks for important precursors. In addition, as a result of the pandemic and Brexit, there was an exodus of foreign workers, particularly in the hospitality and transport sectors.6)

Economic growth in selected destinations worldwide

In %

Economic growth in selected destinations worldwide (bar chart (horizontal))
GDP growth in 2020 and 20217)

In the euro zone, GDP (+5.0%) recovered significantly compared with the previous year, and economic output expanded by 4.9%. Growth is distributed comparatively heterogeneously across the member states. The services sector was impacted in the first quarter by the restrictions imposed in the wake of the pandemic and gradually recovered as the year progressed. On the other hand, industrial production initially quickly overcame the slump in 2020, but increasingly suffered from supply bottlenecks for key intermediate products in the course of 2021. The widespread use of short-time working prevented a significant rise in unemployment. At the same time, inflation increased sharply in the course of the economic recovery. Nonetheless, the monetary policy of the European Central Bank (ECB) remains expansionary in nature.6)

Economic growth in selected destinations throughout Europe

In %

Economic growth in selected destinations throughout Europe (bar chart (horizontal))
GDP growth in 2020 and 20217)

The German economy is also in the recovery phase. The service sector developed positively following the easing of the Corona measures in early summer. However, limitations occurred with the increase in infection activity in the fall. The global supply bottlenecks for corresponding precursors had a significant impact on manufacturing, trade, and industry. The average inflation rate for the year was 3.1%, with November recording the highest rate in 30 years at 5.2%. Compared with the previous year, the recovery was evident in private consumption (+0.4%), imports and exports (+7.8%/+7.3%) and gross fixed capital formation (+1.6%). The unemployment rate fell by 0.2 percentage points year-on-year to 5.7%. Overall, German gross domestic product rose at a rate of 2.5% in 2021.7)

In 2021, the oil price (Brent) fluctuated in a range between $51 and $86 per barrel. The low was recorded at the beginning of the year, the high at the end of October. At the end of the year, the oil price was around $79 per barrel.8)

Economic environment Air traffic (Aviation)

Second year of Corona in Air traffic

The second year of severe, pandemic-related restrictions showed a significant impact on air traffic. A large proportion of the world’s airlines have had to resort to government support measures. In the course of the year, however, Deutsche Lufthansa succeeded in refinancing the only partially utilized state aid completely on the free market. Airports also suffered greatly from the economic impact of the slump in traffic. It was not until later in the year that the situation brightened and demand returned, although it remained well below the 2019 reference year.9)

An IATA (International Air Transport Association) passenger survey showed that 86% of passengers had a high level of confidence in Covid-19 measures on board aircraft. Passengers accepted the rules in place and were therefore receptive to the measures. This conclusion was also confirmed by a survey conducted at Munich Airport.10) However, according to IATA, 60% of travelers said that government restrictions on travel had gone too far, 75% complained about a loss of quality of life, and 86% were in favor of opening the borders.11) A request that was also supported by analyses of the World Health Organization WHO.12) A large part of the traffic downturn in the past two years and the resulting economic loss to the airline industry can be attributed to travel restrictions imposed at short notice and the resulting uncertainty among customers.

Global traffic declines continue to be devastating, according to IATA reports, with a -58.4% drop in revenue passenger kilometers (compared to the 2019 reference year), down from -65.9% last year. However, compared with the previous year, a significant increase has been achieved since April. International passenger traffic was and is particularly affected (-75.5% on 2019), where pandemic-related travel warnings and restrictions had the greatest impact. In contrast, domestic traffic worldwide proved to be relatively resistant to the crisis at -28.2% as of 2019. For example, the development of domestic connections in Russia was even higher than in 2019 at +24.2%. The Chinese domestic market developed similarly until various Corona outbreaks hampered development. Nevertheless, 75.6% of the pre-crisis level was still achieved. The U.S. domestic market approached all but 76.2% of 2019 results, with airports in regions without Covid restrictions (Miami, for example) having already fully emerged from the crisis.13)

Demand for airfreight remained high worldwide in 2021. In addition to economic developments, this was driven by bottlenecks in container shipping. With high freight rates, airfreight, measured in freight ton kilometers, grew by 6.9% year-on-year in 2019 – as much as 18.7% year-on-year, achieving the best annual result since 1990. The supply of freight ton kilometers improved by 13.8% compared with the previous year, partly due to the gradual return of additional cargo transported on long-distance passenger routes.14)

According to European air traffic control provider Eurocontrol, European air traffic recovered in 2021 but remained well below 2019 levels (-44%) at 6.2 million flights. At country level, Germany was affected more than average, reaching only 50%. An examination of traffic figures at airports showed that Munich, with a loss of -64% of traffic, was the hardest hit airport after Manchester, along with Düsseldorf, of the top 40 airports. Europe’s major passenger hubs, which were affected by both local and global Corona restrictions, suffered particularly. Airports with a high proportion of private and leisure travelers and heavy domestic traffic were less affected.15)

The airports organized in the German Airports Association (ADV) recorded significantly better traffic figures in 2021 than in the previous year. A total of 78.5 million passengers (+23%) were handled, although this was 68.6% lower than the 2019 result. On the other hand, cargo volumes (airfreight and air mail) reached a new high of 5,405,841 tonnes (+17.4%) and exceeded 2019 by 13.0%.16)

The report on the state of the industry by the German Air Transport Association (BDL) shows below-average performance by German airlines. Compared to 2019 in Europe, revenue passenger kilometers declined by -70% in Germany, -61% in Europe as a whole, and -58% worldwide. The best performers were North American airlines, which lost -39%. By contrast, Asian airlines were hit just as hard, with -67%, and airlines from the Middle East, with -70%. In Germany, German airlines lost 2% market share, partly due to a continuous shift of traffic to non-European hubs.17)

After declines of over 90% in some cases at the beginning of the year, demand stabilized in the summer months, according to the BDL, only to stagnate again at the end of the year, triggered by the «omicron variant». According to analyses by BDL (SRS Analyser), the number of aircraft movements was also weak, accounting for only 39% of flights in 2019. The development was thus significantly more restrained than in European reference countries. In particular, countries with high tourist volumes benefited, such as Turkey with 65% and Greece with 71% of the volume from 2019, as well as countries with strong domestic traffic. Domestic German traffic, on the other hand, is determined by distances that can also be covered by car or train. In addition, European hub traffic, which is dominated by international traffic, was particularly affected by the travel restrictions. At the same time, competition-distorting framework conditions led to relocations to non-European hubs.18)

The International Civil Aviation Organization (ICAO), a specialized agency of the United Nations, estimates monetary losses to airlines in passenger traffic worldwide at $372 billion in 2020 and $324 billion in 2021; equivalent to nearly $1 billion in losses per day. Compared to 2019, airlines worldwide lost approximately -60% of their passengers in 2020 and -49% in 2021. Deutsche Lufthansa was also badly hit and, according to press reports, faced costs of up to one million euros per hour at peak times during the coronavirus pandemic.19)

Economic environment Commercial Activities

Stationary retail continues to suffer losses

Despite the coronavirus pandemic, the German Retailers’ Association predicts year-on-year sales growth of 1.8% to €587.8 billion. Most of this growth will come from online retailing (2021: +19.2%). Stationary retail is suffering due to the ongoing crisis. Apparel retailers in particular lost a further 9% of their sales compared to the previous year and thus -30% compared to 2019.20)

In the retail sector, the business climate index fell significantly; by 4.5 points year-on-year in December 2021.21)

Food service and hotel industry – sales stagnating

Real sales in the hospitality industry did not change compared to the previous year. In nominal terms, sales increased by 2%. Compared to 2019, however, sales were down 40% in real terms and almost 36% in nominal terms.22)

The individual business sectors showed the following changes compared with the previous year: Sales at hotels and other lodging establishments fell by 3.0%, representing a price-adjusted decline of 4.3%. The food service sector recorded a real decline in sales of 8.6% and the catering sector of 3.2%.23)

Advertising industry – Outdoor advertising reaches new record

In the out-of-home advertising category relevant to the airport, a sales record of €2.5 billion was achieved. Gross sales increased by 8% compared to the previous year, and even the best year ever in 2019 was exceeded by 1%.24)

Parking management – dependence on passenger volume

Passenger declines due to the coronavirus pandemic continue to impact the parking business. Even if the proportion of trips made in personal vehicles generally increased due to hygiene reasons, the mobility restrictions that will persist in 2021 mean that the overall volume of trips will be significantly lower.

Economic environment Real Estate

Munich office leasing market on an upward trend

The office leasing market in Munich was able to end 2021 with a good final quarter, closing with take-up of 664,500 m2, of which 55,200 m2 was attributable to owner-occupiers. The upward trend from the previous quarter thus continued, and the weak first half of the year no longer had such a significant impact on sales. The 10-year average was underperformed by 15%, but take-up was 17% higher compared to 2020 (2020: 567,800 m2). In the segment between 1,001 and 5,000 m2, it is noticeable that companies are again looking for office space after initially adopting a wait-and-see approach during the initial pandemic phase.25)

At the end of 2021, there was 1,055,600 m2 of vacant space, around 268,000 m2 more than a year earlier. The vacancy rate in the financial year was 4.7% (2020: 3.5%). The increase in the vacancy rate stalled in the last quarter, as there was almost no change in the amount of space available in the short term compared to the previous quarter. In the city area, the vacancy rate was 3.7%; in the surrounding area, 7.5% of the portfolio was vacant.25)

Rental prices increased compared with the previous year. The average rent for the market as a whole increased by 9% to 23.50 euros/m2 (2020: 21.50 euros/m2) and the prime rent by 5% to 41.50 euros/m2 (2020: 39.50 euros/m2). The development in prime rents resulted because new leases in prime locations were well above 40.00 euros/m2. The proportion of space taken up by high-priced leases was relatively high and also led to an increase in the average rent. The average rent in the surrounding area was 13.70 euros/m2 (2020: 13.10 euros/m2). In terms of asking rents, a sideways movement in prices can still be observed.26)

In 2022, there will be a significant amount of new construction space on the market. Nearly 600,000 m2 will be completed, 56% of which is still available (2020: 276,000 m2). High completion figures meet below-average demand, so rising vacancy rates must be expected in 2022 as well. Marketing will take longer because the new construction shortage of the pre-pandemic years is now gone. In general, however, new construction space is still very popular with tenants, as it is usually easier to implement new office concepts there.26)

The German economy is recovering more slowly than originally hoped. As a result, it is likely to take some time for demand in the Munich office market to return to pre-coronavirus levels. However, the market has shown its strength in the last six months, even in times of crisis. Take-up is expected to reach 650,000 m2 in 2022, with vacancy rates rising moderately. Market rents are expected to move sideways in most market segments, although prime rents may rise even further.26)

5) ifo Institute, Economic Forecast Winter 2021, December 2021; German Council of Economic Experts, Annual Report 2021/22, November 2021

6) ifo Institute, Economic Forecast Winter 2021, December 2021; German Council of Economic Experts, Annual Report 2021/22, November 2021

7) ifo Institute, Economic Forecast Winter 2021, December 2021

8) IATA, Losses Reduce but Challenges Continue – Cumulative $201 Billion Losses for 2020–2022, October 4, 2021

9) Federal government loans and deposits repaid early – the federal government

10) FMG-Survey-Corona measures.pdf

11) IATA-annual-review-2021 (Updated October 2021)

12) https://www.who.int/news/item/19-01-2022-statement-on-the-tenth-meeting-of-the-international-health-regulations-(2005)-emergency-committee-regarding-the-coronavirus-disease-(covid-19)-pandemic

13) IATA. Air Passenger Market Analysis, December 2021; compare Dec. 2019 with Dec. 2021 here: https://www.miami-airport.com/airport_stats.asp

14) IATA Air Cargo Market Analysis December 2021

15) Aviation Intelligence Unit Think Paper #15 – January 2022 (Eurocontrol)

16) 12.2021 ADV-Monthly statistical report.pdf

17) BDL-Annual figures2021_Management report.pdf

18) BDL Annual Balance Sheet 2021

19) ICAO_coronavirus_Econ_Impact; https://www.zdf.de/nachrichten/wirtschaft/corona-lufthansa-rekordverlust-100.html

20) HDE, Annual press conference, February 2022; February 2022

21) ifo Business Climate Germany by Economic Sector

22) Hotel and restaurant sales in 2021 expected to be unchanged year-on-year in real terms – German Federal Statistical Office

23) DEHOGA, Press release November 2021, February 14, 2022; Hotel and restaurant sales in 2021 expected to be unchanged in real terms from previous year – German Federal Statistical Office

24) Fachverband Außenwerbung e.V., Press release «New record for OOH» from January 18, 2022, February 14, 2022

25) Colliers: Strong final quarter on the Munich office market – press release dated January 7, 2022

26) Colliers: Strong final quarter on the Munich office market – press release dated January 7, 2022

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.
International Civil Aviation Organization (ICAO)
Headquartered in Montreal, the International Civil Aviation Organization is an agency of the United Nations. It has a total of 193 contracting states. The goal of the ICAO and its members is to ensure the safe and sustainable development of civil aviation.

Share this report on social media: