Supermarket real estate investment in Europe grows in the first half of the year. The latest report from Savills reveals a 9% increase in investment in the second quarter of 2024 compared to the previous quarter. This increase took the total volume of investment to €2.7 billion in the first half of the year.
Despite the shortage of stock, which could limit the number of transactions, Savills anticipates that sale & leaseback transactions and mergers & acquisitions will drive activity in this sector. In addition, further portfolio consolidation is expected as the major players in the market seek to expand their market share.
Supermarket returns are expected to remain stable for the remainder of the year, with a possible adjustment in 2025 as interest rates in Europe begin to fall and investors look to increase their exposure to the market. Factors such as improving consumer confidence, inflation slowly returning to target and the expected increase in retail sales set a favourable backdrop for consumers, traders and investors.
The Savills report suggests that increased spending will encourage operators to recover margins and boost their expansion plans, which will accelerate demand for space. With these elements, it anticipates an increase in investment volumes in the sector, thereby increasing investor interest. At the end of Q2 2024, the average yield of European prime supermarkets stands at 5.90%.
Spain increases supermarket real estate investment
Real estate investment in supermarkets in Spain in the first half of 2024 reached €122 million, representing 12% of the total in retail. This figure is already more than half of the total investment in 2023, which was €202 million, indicating significant growth in the sector.
This increase is attributed to a reduction in transacted volume due to the shortage of available products. As in Europe, the Spanish market saw sale & leaseback transactions and significant acquisitions, such as the one made by MDSR Investments, which bought a portfolio of 22 supermarkets from AEW.
Funds dominated investment in 2023, accounting for 69%, while private investors and food operators accounted for 20% and 11% respectively. Realty Income Corporation, a US investor, was responsible for almost 60% of the investment volume. Most of the sellers were European food companies.
Savills anticipates that supermarket chains will expand their locations, adjusting strategies in the face of rising prices and international uncertainty, to offer more attractive and accessible offerings.
