RESEARCH • 7 May 2020
A case for food retailers
Even during recessions, people must drink and eat, and most consumers still prefer to buy food in store.
- Supermarkets and grocery stores are relatively immune to economic downswings.
- Consumers still prefer to buy food in store, making the segment less vulnerable to e-commerce disruption.
- Grocers offer long, inflation-linked leases, and investors can benefit from attractive supermarket valuations.
- Sale-and-leaseback transactions are an opportunity to source property that provides secure income streams.
- Throughout the COVID-19 lockdowns most grocery retailers have largely continued to pay rents to landlords.
- Since online shopping is increasing, though, investors should focus on grocers with the best in-store and online offer.
- Investors must consider local competition, planning regimes, construction site availability and tenant covenants.
- We like integrated, regionally dominant and food-anchored retail parks and neighbourhood schemes including convenience elements in larger cities across Europe.
- We recommend a minimum catchment area of about 80-100,000 inhabitants for retail parks, whereas solus supermarkets of 1,200-1,500 sq m require a minimum catchment area of about 5,000-10,000 inhabitants.
