Supermarkets Investment Overview: Stability and Resilience
Supermarket assets were the driving force behind the Spanish Retail Sector in FY21, accounting for c. €500 million and representing c.44% of total retail investment volume. While the retail sector suffered a major setback in FY21 (-56% in investment vs. FY20), investment in supermarkets increased their share by 30%. So far, in 2022, invested volume has reached €282 million and with further positive growth forecasts (c. €600 million in FY22). Sale & Leaseback has been the most common structure (the sale of an asset by an operator who remains in the property as a tenant on a leasehold) representing c.43% of overall investments.
Investor profiles range from Family Offices acquiring small shops to large institutional and international funds, closing multiple-figure deals in the form of portfolios. In FY21, c.98% of total investment in supermarkets came from funds, from which c.57% came from the United States (USA). On the other side, 44% of the sellers have been the food operators themselves while 35% have been REITs (Socimis in Spain).
E-commerce is booming, but contrary to popular belief, c. 70% of Spanish consumers still prefer physical (tangible) supermarkets for groceries and household products, way ahead of marketplaces or online channels, so there is a clear demand for these assets. For more than 80% of consumers, the shopping process is omnichannel, which means physical and digital spaces are not mutually exclusive, as both of them complement each other and work symbiotically. Major operators perceive physical stores as a key element for their brand positioning.
Supermarkets with more attractive locations can achieve a rent of over €10/sq.m./month, while the national average is €9/sq.m./month. In this sense, the prime locations are Madrid and the Basque Country.
Supermarkets have proven their strength and resilience in an extreme situation such as the pandemic; investors perceive this asset class as highly secure and attractive, with reduced complexity in property management, robustness of their income levels and long duration of their lease contracts.
From CG Capital Europe we expect an enormous volume of transactions, as in 2021 the F&B sector was the main driver of retail investment in Spain and we believe this trend will continue throughout 2022, even reaching a level of unmet demand.