2026-10-10 11:13

Why are supermarkets considered a defensive asset?

Because their income rests on daily shopping rather than on the economic cycle: in 2025, while German industry stagnated, food retail took €217.8 billion — 3.8% more than a year earlier (EHI). The tenants are four unlisted groups with more than 90% of the market, leases with them usually run for 15 years, and planning law holds back new competitors. But the income is protected, not the price: prime retail-park yields have risen from 3.50% at the end of 2021 to 4.75%, which at unchanged rent means a loss of about a quarter of the value.

Demand for food barely depends on the economy

Food is needed every day, so demand for it is structurally non-cyclical: in 2025 food sales grew by 1.1% in real terms (Destatis), even as the economy as a whole stalled. Online remains a niche — 4.9% of German spending on food and drugstore goods (HDE, 2025) — but online sales grew by 10.4% in a year, and that share is worth watching. The quick-commerce start-ups that promised to replace the supermarket have largely left Germany (see Part 1 of the series German Prime Retail).

The sector's resilience has been tested: in the financial crisis and above all in the pandemic, food retail kept trading and paying rent while offices emptied and other shops closed (Part 4).

Strong tenants and long leases turn sales into predictable rent

EDEKA (about 30%), the Schwarz Group (about 25%), REWE (about 22%) and ALDI (about 15%) together take more than 90% of German food retail (Bundeskartellamt). Two of the groups are cooperatives of independent merchants and two belong to foundations of the founding families; none needs the stock market, and all invest with a horizon of decades (Part 2). Leases for new stores are mostly signed for 15 years and cannot be terminated by ordinary notice during that term.

But the protection against inflation is partial: indexation usually takes effect only once inflation exceeds a threshold, and often passes only part of it on to the rent (Part 2).

Planning law limits supply but grants no monopoly

A store with more than 800 m² of sales area counts as large-scale retail (BVerwG, judgment of 24 November 2005, 4 C 10.04). If it could have a noticeable effect on a town centre or local supply, it may be built only in a core area or a special zone (§ 11(3) BauNVO). Regional plans steer such stores to "central places", so a well-located existing store is hard to replace. That is no legal monopoly: planning law is neutral as to competition, and an existing store cannot demand protection from a new rival (BVerwG, decision of 10 July 2020, 4 BN 50.19).

A supermarket's income is protected, but not its price

Like the price of any property, a supermarket's price depends on interest rates: prime supermarket yields rose from 4.90% at the end of 2025 to 5.00% in the third quarter of 2026 (BNP Paribas Real Estate).

The real risks are quieter than the default of a major chain. Tenants outside the leading groups can fail: Schlecker, then Europe's largest drugstore chain, filed for insolvency in 2012. And when a large chain is sold off piece by piece, each store's fate is decided separately. After Metro sold the Real hypermarket chain in 2020, the buyer announced plans to sell more than half of its roughly 270 stores to Kaufland and EDEKA and to close about 30 (Part 12).

Exhibit 1. Six factors protect a supermarket's income, but each has its limit

Factor	What protects	Limit of the protection
Demand	Food sales in 2025: +1.1% in real terms	Rent indexation has a threshold and is partial
Online	A 4.9% share of spending on food and drugstore goods	Online sales grew by 10.4% in a year
Tenants	Four groups with more than 90% of the market	Few candidates to replace a tenant
Lease	As a rule 15 years without ordinary termination	Renewal options belong to the tenant
Planning law	Above 800 m², only in core areas or special zones	No legal monopoly
Price	A 5.00% yield against 3.55% on ten-year bonds	Retail parks: 3.50% at the end of 2021, 4.75% in September 2026

Implications for investors

1. Assess the signature on the lease, not the sign over the door. The income rests on the legal entity that signed the lease, so check its financial statements: tenants outside the leading groups can fail, as Schlecker did in 2012.

2. Treat indexation as partial protection against inflation. It usually takes effect only above a threshold and often passes on only part of inflation, so build the threshold and the share from your own lease into the calculation.

3. Price in interest-rate risk. The income is protected, not the value: a move in the yield from 5.0% to 5.5% at the same rent lowers the value by about 9%.

What to check:
• the legal entity that signed the lease, and its financial statements — the signature protects you, not the sign over the door;
• the remaining fixed term of the lease;
• the indexation clause: the threshold and the share of inflation passed on to the rent;
• the site's status in the development plan and the regional plan;
• the price if yields rise: a move from 5.0% to 5.5% at the same rent lowers the value by about 9%.

Sources: EHI Retail Institute (as reported by Lebensmittel Rundschau, September 2026); Destatis, press release No. 038 of 2 February 2026; HDE Online Monitor 2026 (3 June 2026); Bundeskartellamt, press release of 28 September 2026; BNP Paribas Real Estate, German retail investment market reports for Q4 2021 and Q3 2026; Deutsche Bundesbank, yield curve (7 October 2026); BauNVO § 11(3); BVerwG, judgment of 24 November 2005, 4 C 10.04; BVerwG, decision of 10 July 2020, 4 BN 50.19; German Prime Retail series, Parts 1, 2, 4 and 12.

Photo: Jan-Philipp Thiele / Unsplash

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

Ilya Gordon