2026-10-10 11:34

How do you choose a town to buy a supermarket in Germany?

Choose the store's position in its catchment, not the town: a dominant supermarket in a small "central place" is often more resilient than a store in a metropolis, where prime yields stand at 5.00% — only about 1.5 percentage points above government bonds. Purchasing power matters less than it seems; planning status, competition and population trends matter more. The cost of entry also depends on the location: real estate transfer tax (Grunderwerbsteuer) ranges from 3.5% in Bavaria to 6.5% in four federal states.

The metropolis sells liquidity; the small town sells income

The seven A-cities in the bulwiengesa classification — Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart — offer population density and a deep market in which a good store quickly finds a buyer. Buyers pay for that liquidity with yield. BNP Paribas Real Estate put the yield on prime standalone supermarkets and discounters at 5.00% in Q3 2026; in our experience, that is the floor for stores in the metropolises. For comparison, ten-year German government bonds yielded 3.55% on 7 October 2026 (see Part 5 of the series German Prime Retail).

In smaller towns, comparable stores usually sell at higher yields. The premium pays for real risks: fewer buyers on exit, fewer candidates to replace the tenant and, in some regions, a shrinking population.

Exhibit 1. A yield above 5.00% is paid for in liquidity, tenant quality and lease term

Type of location	Advantage	Price of the advantage
A-city	Population density and a quick sale	A 5.00% yield — the market's floor
District centre — a "central place"	A town of 10,000 inhabitants may serve 30,000 people or more	Fewer buyers on exit
Village edge without central-place status	Higher yield	Second-tier operators and short leases (Part 7)

Central-place status matters more than purchasing power

Purchasing power shapes what a store sells rather than how much: as income rises, the share spent on food falls. Germany's most affluent district is Starnberg near Munich: €42,751 per head against a national average of €31,193 (NIQ, 2026). But affluence shows in the store format and the contents of the basket, while sales volume follows the number of residents.

What makes income durable is the absence of a competitor, and planning decides that. A store with more than 800 m² of sales area that can noticeably affect the town centre or local supply is permitted only in a core area or a special zone (§ 11(3) BauNVO). State development plans steer such stores to "central places" (§ 1(4) BauGB).

Bavaria shows how this works: its central-place system has five tiers, from basic centres (Grundzentren) to metropolises (LEP Bayern, objective 2.1.2). Local-supply stores of up to 1,200 m² of sales area are allowed there in every municipality (objective 5.3.1). Surrounding villages are too small for a full-range supermarket of their own, so the district centre draws their shoppers.

A small town pays off only under three conditions

A small town's higher yield is justified if the store is the dominant grocery offer in its catchment, the lease is long and signed with a first-class tenant, and the catchment population is stable or growing. Much of Bavaria, Baden-Württemberg, Hesse and the Rhineland meets the third condition comfortably; some rural districts in the east and north of the country do not. Check the site as well: grandfathering (Bestandsschutz) protects the store as approved, not the larger store the tenant will want when the lease is renewed.

The cost of entry depends on the federal state: on a €10 million purchase, the tax comes to €350,000 in Bavaria and €650,000 in North Rhine-Westphalia.

Exhibit 2. Transfer tax rates differ almost twofold — from 3.5% to 6.5% of the price

Rate	Federal states, October 2026
3.5%	Bavaria
5.0%	Baden-Württemberg, Lower Saxony, Rhineland-Palatinate, Saxony-Anhalt, Thuringia
5.5%	Bremen, Hamburg, Saxony
6.0%	Berlin, Hesse, Mecklenburg-Western Pomerania
6.5%	Brandenburg, Saarland, North Rhine-Westphalia, Schleswig-Holstein

Implications for investors

1. Assess the catchment, not the town. The store's dominance, competitors within a ten-minute drive and central-place status decide how durable the income is; they matter more than the residents' purchasing power.

2. Accept a small town only under the three conditions. The store dominates its catchment, the lease is long and signed with a first-class tenant, and the population is stable or growing; if any one is missing, the higher yield is merely payment for risk.

3. Check that the site has room to expand. Grandfathering does not extend to the larger store the tenant will want when the lease is renewed. And the average store falls short of retailers' requirements for new sites by about 450 m² for a supermarket and 250 m² for a discounter.

What to check:
• the town's status in the state or regional development plan and its tier in the central-place system;
• the population forecast for the town and its catchment;
• competitors within a ten-minute drive and new stores already approved;
• the site's zoning and room to expand: the gap between the average store and retailers' requirements for new sites is about 450 m² for a supermarket and 250 m² for a discounter;
• the transfer tax rate in the state where the property lies.

Sources: bulwiengesa city classification; BNP Paribas Real Estate, retail investment market Germany Q3 2026 and food-retail investment market Germany Q4 2025; Deutsche Bundesbank, yield curve (7 October 2026); NIQ, Kaufkraft Deutschland 2026; § 11(3) BauNVO; § 1(4) BauGB; Bavarian State Development Programme (LEP Bayern), objectives 2.1.2 and 5.3.1; state laws on real estate transfer tax rates (October 2026); the series German Prime Retail, Parts 5, 7 and 12; Gordon Real Estate Group transaction experience.

Photo: Jan-Philipp Thiele / Unsplash

This page is general information and not investment, legal or tax advice.

Ilya Gordon