2026-10-10 11:28

Where is the yield higher: a supermarket in a metropolis or in a small town?

In a small town: comparable supermarkets sell there at higher yields, while BNP Paribas Real Estate's benchmark for prime assets, 5.00% in Q3 2026, is in our experience the floor for stores in the metropolises. BNP publishes no supermarket yields by city size, but rents show the gap: food stores pay an average of €16.82 per m² a month in the largest cities, €11.28 in small towns and rural areas (Hahn Group). The yield premium is the price of a smaller pool of buyers and of replacement tenants.

BNP reports yields by property type; location enters through asset class

BNP Paribas Real Estate publishes prime yields by property type: 5.00% for standalone supermarkets and discounters, 4.75% for retail parks with a grocery anchor. By city, the broker breaks down only inner-city retail buildings, from 3.50% in Munich to 4.10% in Cologne and Stuttgart. Even among the seven largest cities, location moves the yield by 0.6 percentage points.

For supermarkets, location enters the price through the asset class. In 2025 the best supermarkets and discounters sold for up to 18.5 times annual rent (a gross yield of 5.4%), core-plus assets for 15.5 (6.5%) and value-add assets for 12.5 (8.0%). A core-plus asset lacks at least one attribute of the best: a long remaining lease term, a strong location or a first-tier tenant (see Part 12 of the series German Prime Retail). In our experience, stores in smaller towns sell at yields above the prime benchmark because land there is cheaper and buyers are fewer (Part 5).

Big-city rents are 1.5 times higher, and prices differ even more

Location explains 20% of the differences in food-store rents, format only 2% and year of construction 10% (Hahn Group, a sample of more than 700 stores). Beyond the gap between large cities and the countryside, there is one between west and east: outside Berlin, stores pay an average of €12.32 per m² a month in the west and €10.28 in the east. The authors link it to purchasing power, land prices, population and turnover potential.

Exhibit 1. In our example, a city store of the same size costs 1.8 times as much and yields 1 point less

Indicator	Largest cities	Small towns and rural locations
Average rent, € per m² a month (Hahn Group)	16.82	11.28
Rent of a 1,850 m² supermarket, € thousand a year	373	250
Multiple in the example (BNP, 2025)	18.5	15.5
Price, € million	6.9	3.9
Gross yield, %	5.4	6.5

The example is our calculation: the city store is given the prime multiple, the small-town store the core-plus multiple. This is an assumption, not market statistics.

The premium pays for three risks: exit, re-letting and demographics

A small town's higher yield compensates for three risks (Part 5). The first is a narrow pool of buyers on a sale: for institutional investors a single store is too small a lot, and its natural buyers are private investors (Part 4). The second is a shortage of candidates to replace the tenant: four groups control more than 90% of food retail (Bundeskartellamt). The third is the shrinking population of some rural districts in the east and north of the country.

A weak market narrows the pool of buyers. In the first nine months of 2026, investment in retail property fell by 25%, and the share of foreign buyers dropped from 50.1% to 30.6%. The share of the seven largest cities rose from 20.1% to 36.8% (BNP Paribas Real Estate). Trading liquidity for income therefore makes sense only under three conditions: the store dominates its catchment, the lease is long and signed by a first-class tenant, and the catchment population is stable or growing.

Implications for investors

1. Compare yields adjusted for liquidity. The extra percentage point of yield in a small town pays for a narrower pool of buyers and of replacement tenants.

2. Do not apply the 5.00% benchmark to a small town mechanically. It is the yield on prime assets and, in our experience, the floor for the metropolises; check a small-town price against deals in the same region.

3. Buy small-town income only under three conditions. The store dominates its catchment, the lease is long and signed by a first-class tenant, and the population is not shrinking.

What to check:
• deals in comparable stores in the same region and type of settlement, from a broker rather than a national benchmark;
• the rent per m² against the average for the type of location: €16.82 in the largest cities, €11.28 in small towns and rural areas;
• how many chains could replace the tenant in this catchment;
• the population forecast for the catchment;
• the remaining fixed lease term, excluding the tenant's options.

Sources: BNP Paribas Real Estate, German retail investment market report for Q3 2026 and food-retail investment market report for Q4 2025 (multiples); Hahn Group, Retail Real Estate Report 2026/2027 (as reported by LEBENSMITTEL PRAXIS, 3 September 2026); Bundeskartellamt, press release of 28 September 2026; the series German Prime Retail, Parts 4, 5 and 12; Gordon Real Estate Group calculations and experience.

Photo: Jan-Philipp Thiele / Unsplash

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

Ilya Gordon