German food retail properties an attractive bet – study

Food retail properties such as discount stores and supermarkets are an attractive asset class for investors in Germany, a study by property company TLG Immobilien and market research firm Bulwiengesa AG concludes.

With average yields of 6-7%, investments in food retail properties earn ‘significantly higher and more stable returns' compared to other asset classes, the study found.

The attractiveness of food retail properties is attributed partly to the rising food expenditure in Germany in recent years and the expected future increase in spending per head, which will also compensate for potential population losses.

‘In addition, restrictive German planning laws create a de facto safeguard and long-term leases for many existing food retail premises. This makes it difficult to create new locations outside the central supply areas,’ said Niclas Karoff, managing director of TLG Immobilien.

Food retail locations in regional growth cities in the east of the country such as Dresden, Erfurt and Rostock, as well as Potsdam and Jena, offer particularly good returns at up to 7.2%, according to the study.

‘Medium-sized cities in eastern as well as western Germany frequently offer significantly higher returns than the metropolitan areas, at the same or a slightly higher risk,’ explained Karoff.

However, the study’s authors caution that the data should be put in perspective in light of the limited number of transactions in some cases.

CLICK HERE to read the full study Food Retail Properties in Germany 2014 - Market Trends and Investment Opportunities