There is no grass, not even the toughest of grasses. Bermuda, that can stand up that kind of heavy traffic.

For the life of me I cant envision a dog, any dog, causing compaction of soil unless they happen to be 200 pounders that continually go over a straight line of ground.
I know a Sheppard is a large dog, but compact ground...I don't think so.

Compaction can occur over time due to poor drainage, especially in clay soil and sometimes aeration can help.
As far as the dog's urinating killing grass, there is absolutely nothing that will change that. Urine--especially they say, females watering is the worst, will kill grass due to its high content of nitrogen. Much like you could do the same thing if you spilled heavily some fertilizer.
The only remedy is to stay ontop of their going; water the area more than usual, then dig up the damaged area and replace with plugs taken from other areas or do an overseeding. It helps to change the dogs' ritual of going in the same place constantly.
Don't be misled by some who will tell you to change their diet, make it more dry causing them to not build up water in their system. That can only lead to your pet's health problem. Changing a dog's diet does nothing about his pee; it could though affect his health.

For the life of me I cant envision a dog, any dog, causing compaction

Don't think it is really compaction, but rather the dog just beating the grass down. Just about anyone who hac a dog kept in a fenced yard has a dog trail.