Investment in food-related assets, a record in Europe in 2020 with a 21% share of total retail

Investment in food-related assets, a record in Europe in 2020 with a 21% share of total retail

The food sector is becoming the new core of real estate investment in retail, according to the international real estate consultancy Savills Aguirre Newman. Last year, for the first time, investments in supermarkets, hypermarkets and food stores represented a participation record with 21% of total retail activity in the continent, compared to an average of 7% in the previous five years. Despite the decrease in the increase in retail sales in 2020 (from 3.9% in 2019 to 1.7% in 2020), food sales increased by 7.5%, and are expected to continue growing by 2, 2% annually for the next five years.

Spain ranked third in investment markets in the food sector in 2020, with 675 million euros, behind Germany, which was the largest market with 3,100 million euros, and the United Kingdom, with 1,700 million euros allocated a of real estate investment in the food sector. Spain was the second fastest growing market, registering 145% above the average of the last five years, only behind Germany, which registered an increase of 217% compared to the average in the same period.

Salvador González, Retail Investment Director at Savills Aguirre Newman, explains that "the defensive characteristics and operational resistance of the sector will continue to attract a growing number of buyers. It is possible that some assets will reach the market through sale & lease back, but there is little supply for the current demand and high competition ”.

Savills Aguirre Newman considers that competition between investors has caused a compression of profitability for prime supermarkets in Europe, which will go from 5.7% to 5.4% in the first quarter of 2021.

Forecasts online

According to Forrester data, the growth rate of online sales in the food sector in Western Europe went from 19.5% in 2019 to 56.1% in 2020. The share in food and beverages jumped from 3.4% to 5.3% on average across the region and is expected to reach 12.6% in 2025.

According to the report, unlike other ecommerce categories, online grocery orders are usually served by the stores themselves, which makes the store's cash value higher than is initially apparent.

During the pandemic, the large food operators were able to meet the increased demand online thanks to their network of stores. The already established operators have grown and in this time new models of online food sales have emerged that differ by the type of products and services they offer or their ordering and delivery method. Although these new operators do not need physical stores, they depend on almost instantaneous delivery and for this they rely on urban warehouses to compete, awakening demand for this type of space in the cities in which they serve.

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