Part 1. Germany’s Food Retail — Judgement Day Investment

Why Global Investors Keep Pouring Billions Into Germany’s Food Retail Real Estate — Part 1 of 3.

While experts continue to debate whether Germany should be called “the sick man of Europe” (Bloomberg, 2023) or merely “tired” (former Finance Minister Christian Lindner, 2024), the country’s population keeps setting new records in domestic consumption of certain strategic goods and services — even amid a deepening crisis marked by the collapse of the ruling coalition, the restructuring of energy markets, soaring interest rates, and stagnation in key sectors such as construction, chemicals, and automotive manufacturing (the potential closure of VW plants being an unprecedented event in Germany’s postwar history).

According to the EHI Retail Institute, German consumers spent a record €204 billion on food products through retail channels last year — of which only €3.7 billion came from online sales, €0.3 billion less than the year before. Thus, for the first time in history, Germany recorded a decline in online grocery retail sales.

The withdrawal of rapid grocery delivery operators such as Getir and Gorillas from the German market in 2024 shows that, at this stage in history, online services are still unable to pose any serious competition to brick-and-mortar retail in this segment. Germans continue to favor in-store grocery shopping as much as ever.

Germany remains the undisputed leader in food retail sales in Europe, accounting for over 10% of the total market, which currently stands at €1.936 trillion, with projections to reach €2.4 trillion by 2028.

Who controls this strategic sector in the most populous country in Western Europe (84.6 million people)? Who commissions and builds new retail properties? Which locations do experienced market players prefer? What returns do these properties generate — and what are the goals and motivations of investors? Let's take a closer look.

Investors put $1 trillion in German commercial real estate over the past 25 years

According to Colliers International, one of the world’s Top 5 real-estate advisory firms, private and institutional investors have invested the equivalent of $1 trillion in German commercial real estate over the past 25 years.

While funds, banks, and insurance groups traditionally prefer capital-intensive segments such as office, logistics, and rental residential portfolios priced between €10 million and €1 billion per asset or portfolio, affluent private investors have long favored grocery-anchored retail properties — discount stores, supermarkets, hypermarkets, and shopping centers priced between €3 million and €20 million — provided they are leased on a long-term basis to tenants from Germany’s Top 10 retailers, ideally one of the Top 4.

Why them?

85% of Germany’s grocery retail market is controlled by the “Big Four”

According to the Federal Cartel Office (Bundeskartellamt), up to 85% of Germany’s food retail market is controlled by just four players — the so-called “Big Four”:

Schwarz Group (operator of Lidl and Kaufland), REWE Group, EDEKA Group, and ALDI Nord / ALDI Süd.

Collectively, they operate over 47,000 supermarkets across more than 30 countries, employ 1.7 million people, and generate combined annual revenues of nearly €420 billion (2023 data).

Construction and modernization — in the hands of “court developers”

The business of building and upgrading grocery retail properties in Germany lies largely in the hands of long-established “court developers” — companies that maintain long-term, trusted relationships with the management of the Big Four and other Top-10 retailers, while constantly competing behind the scenes for the best plots of land and local building permits.

Most of these developers are family-owned firms, a business structure highly popular in Germany. The oldest among them are over 100 years old, and the largest reach annual revenues of up to €2 billion.

The German retail-property market: everyone invests here

Unlike in the UK, where leading retailers typically own the land and buildings of their supermarkets, the German retail-property market offers far broader opportunities to a wide range of investors.

For example, properties operated by the Big Four are owned not only by the retailers themselves, but also by domestic and foreign banks, insurance companies, investment and pension funds, and specialized real-estate funds focusing exclusively on one asset type.

In addition, private Ultra-High-Net-Worth Individuals and Families from around the world are actively investing in single-asset and portfolio transactions — confirming Germany’s status as one of the most stable and investor-friendly retail property markets in Europe.