A Berlin rating agency is dealing with the far-reaching change in the use of retail real estate: “The local supply sector is one of the winners. Investors appreciate its independence from economic cycles. There are still challenges – sustainability is one of them,” says the research of the Scope Fund Analysis.
Scope sees the reason for the structural change in the retail segment in the growing importance of e-commerce. “Real estate prices in this type of use have been falling for several years and are currently back at the level of 2016. The Covid 19 crisis has accelerated this trend.”
The agency is now investigating the different market behavior in the sub-segments. In principle, the following applies: “The systemically relevant local supply has separated itself from systemically irrelevant retail concepts. Especially in comparison to the textile retail trade, in which insolvencies are currently increasing, the food retail trade has recently developed well. Since many local supply companies are considered to be comparatively creditworthy and non-cyclical tenants, real estate with a focus on local supply – also due to their often long-term leases – have become significantly more attractive to investors. This has not changed in view of the current challenges. The consequences are rising prices for local supply properties such as retail parks.”
Nevertheless, according to the Scope analysts’ warning, local suppliers are also subject to change: “Not least from a sustainability perspective, issues such as organic food, regional products and animal welfare have increasingly come into focus. To what extent people’s consumer behavior is now changing again due to the high inflation will change will soon become apparent, since real losses in purchasing power will take place.”
The topic of ESG is becoming increasingly important for properties and food retailers, not least against the background of the energy crisis. According to Scope, many companies are trying to supply their properties with green electricity – often already produced with solar roof systems – because greenhouse gas emissions have been high so far. “The issue of waste and recycling also plays a major role in this segment. So there are enough tasks in this context and potential for optimization.”
“Both open and closed real estate vehicles are available to investors with a focus on the local supply segment. Scope currently has five investment vehicles for private investors: two closed and three open real estate funds. Another product has been announced.” What follows in the agency’s report of September 20, 2022 is a listing of funds such as “Dr. Peters Immobilienportfolio Deutschland I”.
The quoted report entitled “Nahversorgung – Stein der Weisen im Bereich Einzelhandel?” (i.e. “Local Supply – Philosopher’s Stone in Retail?”) does not contain any indication that interested investors not only have access to these vehicles for indirect investment in retail real estate – quite apart from direct investments. In Germany, for example, listed companies that are fully committed to investing in retail real estate have developed extremely well.
Shareholders of DEFAMA Deutsche Fachmarkt AG benefit from the many years of real estate, retail and capital market experience as well as the large network of the team at this company, which attaches great importance to lean cost structures and a clear strategy, a balanced mix of tenants and a solid financing basis. The DEFAMA share is traded in the m:access of the Munich Stock Exchange as well as on XETRA and in Frankfurt.
In addition, there is the special instrument of the listed REIT to invest in retail real estate. Deutsche Konsum REIT-AG invests sustainably in retail properties for everyday needs in established shopping locations away from the major cities. This strategy aims to achieve attractive, economically stable and income tax-exempt returns and distribute them as dividends. The company’s shares are listed in the Prime Standard of the German Stock Exchange.
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