The European grocery market is the largest retail sector in Europe, and it is growing steadily, estimated to reach €270bn by 2023. The sector is defined by long leases, strong tenant covenants and stable rental growth, appealing to investors looking for longer and more robust income streams.
During COVID-19 investor interest for grocery anchored real estate assets surged as the grocery sector established itself as a resilient investment option during the crisis. Despite the COVID-19 pandemic halting much of the economic activity across Europe, the grocery sector grew by 3.2% in 2020.
Grocery retail in Europe has been historically the most defensive sector against the shift in retail spending towards online. Consumers have shown reluctance in purchasing grocery goods online due to delivery costs, quality and the perishable nature of fresh produce, as well as the convenience of nearby grocery stores.
Whilst COVID-19 spurred growth in online grocery sales during 2020, progress was constrained due to limited availability of delivery slots and problems with infrastructure unable to cope with the rise in demand.
Despite the recent shift towards online grocery retail due to the pandemic, physical supermarkets continue to fulfil an irreplaceable role in food distribution. Almost 90% of all revenue continues to be generated from physical supermarkets in Europe’s mature retail markets.
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