International real estate advisor Savills has reported its outlook for the European grocery sector, finding positive momentum for consumers, retailers and investors.
According to Savills, increased spending will help retailers’ margins recover and drive expansion plans, accelerating occupiers’ need for space.
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These factors are expected to significantly fuel investor appetite and increase investment volumes for the sector.
This is reflected by GlobalData’s retail industry intelligence, which forecasts that sales in the European food and grocery retail sector will reach €2,862bn by 2027, growing at a compound annual rate of 8.3%.
As of the second quarter of 2024, Savills’ average prime European supermarket yield stands at 5.90%, retail warehouse yield at 5.94% and 6.25% for shopping centre yield.
Savills director of global cross-border investment James Burke commented: “We expect to continue to see consolidation of portfolios as the big grocery players look to grow their market share. Supermarket yields are expected to remain stable for the remainder of the year and begin to harden in 2025 as interest rates across Europe fall and investors seek to increase their exposure to the market.”
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By GlobalDataThe company predicts a rise in consumer preference for smaller and convenience stores, leading to many retailers focusing on city centre “express” shops and reducing the hypermarket format.
Savills head of European retail agency Larry Brennan explained: “Shoppers have become much more reliant on what is local, in addition to larger, less frequent supermarket shops. This is resulting in many retailers rethinking their hypermarket footprint.”
Georgia Ferris, European research associate at Savills, advises that for grocery stores located outside of city centres, for example in shopping centres, “the best assets need to be decentralised from the main shopping centre so that consumers can easily access the store by car and utilise click and collect services. These types of supermarkets also need a good retail mix provided by the centre to ensure high footfall to the location.”
