x+bricks
English

Food anchored real estate - fool-proof retail?

Sascha Wilhelm on how investing in food real estate can provide safe returns against E-commerce
4 MIN READJanuary 29, 2020

Sascha Wilhelm, CEO of x+bricks AG, talks to the GRI Hub about the benefits of investing and operating within the food real estate market. 

 

You mainly invest into food-orientated properties. Why is this? Are the yields to be found here specific to Germany?

That’s right, x+bricks invests in food real estate such as supermarkets, discounters and retail warehouses. We believe in physical food retail. There are several reasons for this. Food-anchored real estate is as much a basic and universal need as housing. 

We always eat. The demand for food will not change in the foreseeable future, the population in Germany will remain stable through immigration. The continued growth in overall German retail food revenue for more than 10 years underscores its independence from the economy’s ups and downs.

Food operators as anchor tenants provide fundamentally strong revenue base resilient to economic cycles and online retail expansion. Online food retail share is very low and is expected to remain insignificant. And we still see the logistical problem of restricted zoning. Our key tenants enjoy excellent credit ratings and continue to expand rapidly. They generally sign long leases on their store locations.

Both, the return opportunities and the risk-return profile, remain good in this sector.

 

How important is mixed-use and placemaking when it comes to working with these assets? Is there a benefit to looking at investing in secondary cities?

Mixed-use and placemaking strategies can make sense in the top cities. Here, there is usually a lack of building land, and reidentification can lead to much more efficient land use. If there is a benefit to looking at investing in secondary cities is not relevant for us and within the category food. We invest in food-anchored real estate throughout Germany. It does not matter if it’s an A- or B-city.

We count about 27,000 discounters and supermarkets throughout Germany. An investment depends primarily on the catchment area, the purchasing power of the region, the retail density, the population development and the attractiveness of the property.


Some suggest Germany is heading for a recession. Does German retail have the strength to survive a crunch and if not, what must the sector do to mitigate exposure?

We reassure you: food is a basic need! Food real estate behaves entirely different from other retail formats, especially in crisis. 

 

Why is E-commerce not a threat for food real estate?

Germany’s online food retail industry is just starting to develop. The percentage growth rates of online business are already slowing down. Although a high-growth phase is likely to happen, it is expected to come from a very small base. The share of total industry revenue of €202 bn in 2021 is expected to remain insignificant. 

Some food retailers are starting to invest in and innovate more with their online offers. The solutions include “click and collect” services using and strengthening existing locations. 

Due to the decentralized German city landscape online, food infrastructure is very expensive. Europe’s strictest regulations on fresh food delivery further complicates online expansion. Fresh delivery service covers only the big seven metropolitan areas in Germany. 

 

Join other investors, developers and operators active in German real estate at Deutsche GRI, taking place on 12-13 May in Frankfurt.

Article by Matt Harris

Related News
←  SHARE
Real Estate
GRI
X
Privacy policy and how we use cookies
We use cookies to give you the best experience on our website.
By continuing we'll assume you're on board with our privacy police
Accept and hide this message