Despite the decline of retail sales growth in Europe in 2020 (from 3.9% in 2019 to 1.7% in 2020), food and grocery sales increased by 7.5%, and are expected to continue to rise by 2.2% per annum over the next five years.

Germany was the largest food and grocery investment market at €3.1bn last year, followed by the UK at €1.7 billion and Spain at €675 million. The countries that experienced the sharpest rise compared to their five-year average were Germany (217%) and Spain (145%). The international real estate advisor says that investor competition has led to yield compression, with the prime average supermarket yield in Europe moving in from 5.7% to 5.4% by Q1 2021.                         

George Coleman, Associate, Savills Regional Investment Advisory EMEA, says: “The defensive characteristics and the operational resilience of the sector will continue to attract an increasing number of buyers. Some product may come on the market through sale and leasebacks, but overall supply may not be able to meet demand. In view of the further intensifying bidding war, we expect prime yields to move in further during this year.”

According to Forrester data, the online growth rate of the grocery sector in western Europe went up from 19.5% in 2019 to 56.1% in 2020. The online share of food and drink jumped from 3.4% to 5.3% on average across the region and is projected to reach 12.6% by 2025.

Eri Mitsostergiou, Director of European Research at Savills, says: “Unlike much of the rest of retail, online grocery orders are typically serviced by the stores themselves, making the true value of the store much greater than is initially obvious. During the pandemic, large food retailers were only able to meet the surge in online demand because of their network of stores. Established pure players have grown and new e-grocer models have emerged during the pandemic, differentiating themselves by the type of products and services they offer and their method of fulfilment and delivery or order. Although they do not require physical stores these companies depend on near-instant delivery – and rely on urban warehouses to compete.”

Eri Mitsostergiou

Director, European Research
Savills

Eri is responsible for the coordination of Savills European Research and for providing advice to Savills clients on their strategy and activity in the European property markets. Eri joined Savills UK within the Commercial Research department in London as a Senior Analyst in November 1999. She is now a Director and coordinates Savills' European research, whilst providing internal support with Savills European business development and direct external advice to Savills clients with their European strategies. Eri has built a reputation for being an expert analyst of the European Property Markets and her opinions are regularly quoted in the international property press. She is a qualified Architect and has completed the MSc in European Property Development and Planning and the Investment Property Forum Diploma at the City Business School. She is currently on the Executive Committee of the European Research Group of ICSC and the Executive Committee of ULI Greece and Cyprus National Council. In addition she is a Mentor of the Savills Mentoring Scheme. She is fluent in Greek, English, Italian and German and has a good understanding of Spanish, Dutch and Romanian. She is currently based in Bucharest and she has worked previously from the Savills offices in London, Athens and Amsterdam. More »

Marek Paczuski, Director, Investment at Savills Poland, comments: “The grocery real estate sector is also attracting rising investor interest in Poland. Tesco has recently agreed to sell its stores to pull out of Poland, but irrespective of those transactions, such properties are clearly the most sought-after retail asset class, especially given operational restrictions on shopping centres and relatively attractive yields. Both institutional and private investors are looking for large standalone hypermarkets and food discount stores or smaller convenience outlets. There are several transactions pending in this segment, including a portfolio deal worth close to €100 million. With investor sentiment moving toward this asset class, supply constraints are gradually becoming a challenge.”