Trend report: Food discounters 2020DIWG publishes ...

In times of historically low interest rates, real estate continues to be of great importance as an investment asset. Although yields on real estate investments have now reached a new low, they are still significantly higher than those of traditional financial investments. In addition, financing conditions remain attractive and at least partially offset the currently high prices for retail properties. While the COVID-19 crisis has led to noticeable price declines and rising yields in some asset classes, no price declines have been observed to date for retail parks or retail park centers with a tenant or anchor tenant from the grocery sector. As long as the ECB maintains its low-interest-rate policy, we expect demand for investments in corresponding retail properties to remain stable or even increase. As a result, pressure on yields is likely to continue, so that a further slight but steady decline can be expected.

Despite customers’ price sensitivity, topics such as store design, fresh products, and branded goods are also becoming increasingly important for discounters, leading to a narrowing of the differences between full-range grocery retailers and discounters. Aldi, Lidl & Co. have long since moved away from the concept of the spartan hard discounter, making room for new concepts that revive the original discount idea of the 1960s, characterized by a reduced assortment and very simple stores.

Whether established providers will enter this newly created niche themselves or leave the field to other operators remains to be seen. E-commerce has so far been treated rather neglectfully by discounters. There is still greater catch-up potential here than among full-range grocery retailers, especially if providers such as Amazon Fresh introduce their services nationwide in Germany. So far, the offering is still limited to a few regions.

You can find the trend report as a PDF HERE.