German Prime Retail

Part 3. How Germany Builds Its Supermarkets — and Why New Sites Are So Rare

Germany is not short of supermarkets. It is short of places where new ones may be built. Decades of post-war expansion covered the country with food stores, and planning law now channels large new stores into a limited number of designated locations. The result is a development market that works unlike any other in German real estate: a small circle of trusted developers, retailers who choose sites with forensic care, and a steady flow of rebuilt and enlarged stores on sites that have traded for decades. For investors, understanding how a store comes into being is the first step towards judging how long it will last.
Key takeaways
• Every new supermarket needs five parties to align: the municipality, the retailer, the developer, the lender and, increasingly, the equity investor.
• Two documents unlock financing and define the asset: a building permit and a lease signed by a leading retailer, mostly for 15 years.
• Planning law makes new sites scarce: in our experience most new stores replace or enlarge existing ones, and a retailer's decision to rebuild on a site it already trades from is one of the strongest signals of location quality.
• The most sought-after projects go to a small circle of long-standing developers; investors gain access through them, not through the open market.

Five parties with different needs must align on every new store

Every new food-retail store in Germany is the product of five interests that must align.
Exhibit 1. Developer, lender and investor all need the retailer's signed lease
Party
Role
What it needs
Municipality
Sets the planning rules through its development plan; the permit itself is issued by the building authority, often at district level
Compliance with the land-use plan and the regional plan; protection of the town centre
Retailer
Chooses the site and the format; signs the lease; usually tenant, sometimes owner
Catchment, visibility, parking, a store built to its specification
Developer
Secures the land, obtains permits, builds and sells
A permit, a signed lease and financing
Lender
Finances land and construction
A land charge on the site, with the permit and the signed lease as conditions for lending
Equity investor
Buys the completed store or funds it during construction
A long lease, a strong tenant, a reliable developer (Part 6)

A small circle of trusted developers controls access to the best projects

Outside ALDI's and Lidl's own building programmes, new stores for Germany's leading food retailers are delivered largely by a small circle of developers who have worked with the same chains for decades. Many are family-owned; the oldest trace their history back a century, and the largest operate across several European countries. Mandates often come directly from the retailers' expansion departments, which prefer partners who have proven they can secure difficult sites, navigate local planning politics and deliver on time and to specification.
The best projects therefore rarely appear on open marketplaces. Developers allocate them to buyers they know — buyers who decide quickly, fund reliably and do not renegotiate after due diligence. Access is a relationship, built over years.

A permit and a signed lease unlock financing and define the asset

Banks and insurers will finance a new store against the land and the building to come, provided the developer can present two documents: a building permit, and a lease signed by a leading retailer.
Leases for new and enlarged food stores mostly run for 15 years — BNP Paribas Real Estate reports this for enlargements, and it matches our experience of new builds. That is a fixed term during which neither party may terminate in the ordinary way (Part 7 covers the exceptions), usually with options for the tenant to extend. For sites they consider strategic, some retailers sign for 20 years.
These two documents define the asset. The permit determines what may be built and operated; the lease determines who pays for it, for how long and on what terms. Everything else — the building, the car park, the signage — follows from them.

Planning law, not demand, makes new sites scarce

German planning law treats large food stores as a matter of public interest. Stores with more than 800 m² of sales area count as large-scale, as the Federal Administrative Court has held (BVerwG, 24 November 2005, 4 C 10.04). If they can have more than minor effects on town centres, local supply, traffic or the goals of regional planning, they may be built only in core areas or in special zones designated for them (§ 11(3) BauNVO); above 1,200 m² of floor space such effects are presumed, although the presumption can be rebutted in either direction. State and regional development plans then steer these stores to "central places" — towns designated to supply their surroundings — and protect town centres from out-of-town competition. Part 5 explains why existing, well-located stores benefit — and why that benefit is not a legal entitlement.
The threshold has shaped the country's store stock and made planning status an asset in its own right. For years many discounters were built with sales areas just under 800 m² — 799 m² is a figure that recurs in German development plans — precisely to stay below it. Today's formats have outgrown that limit, so enlarging an older store usually means new planning permission, often a new development plan for the site. A plot whose development plan already allows a large, modern store is therefore worth more than an otherwise identical plot that does not.
The other side of these rules is scarcity: genuinely new sites on greenfield land have become exceptional. In our experience, most new stores today are replacement buildings: a retailer that has traded on a site for 15 or 30 years decides to demolish its old store and build a larger, modern one on the same plot, or to enlarge it substantially.
Such a rebuild is one of the most valuable signals an investor can read. A retailer that has watched a location for decades — with full knowledge of its turnover — and then commits to it for another 15 to 20 years is giving the strongest possible vote of confidence in that site.
Two cautions keep the signal honest. First, a retailer's commitment speaks for the location, not for the terms: who pays for the new building, and at what rent, decides whether the landlord shares in that confidence (Part 7).
Second, planning protection cuts both ways. A special zone usually fixes the permitted use, the maximum sales area and often the range of goods, so the rules that keep competitors out also limit what the building can become if the tenant ever leaves. Investors should read the development plan as closely as the lease.

The gap to modern formats is every portfolio's silent reserve

The gap between today's average store and the retailers' own expansion profiles is what BNP Paribas Real Estate calls the silent reserve in every portfolio. The average German supermarket has a rental area of about 1,850 m², the average discounter about 1,250 m²; the expansion profiles now call for about 2,300 m² and 1,500 m² — a gap of roughly 450 m² per supermarket and 250 m² per discounter. Enlargements usually bring rent increases and a new lease, mostly for 15 years.
Energy features add a second source of value: they lower operating costs for the tenant and make the building easier to re-let or sell — an advantage that will grow as energy and sustainability standards tighten. Today's new full-range supermarkets are larger, brighter and more energy-efficient than the stores they replace. Roofs increasingly carry photovoltaic systems, refrigeration waste heat is recovered for heating, and car parks are equipped with charging points.

Investors who fund construction accept completion risk for a better price

Funding a store during construction suits patient investors — and rewards those who know the developer well. When interest rates are high, developers increasingly sell projects before completion to investors who fund construction from equity. The developer saves much of the cost of construction loans; the investor can negotiate a better price and a building completed to an agreed specification, in return for carrying construction and completion risk.
Where the developer sells land and building together and takes the buyer's money before completion, German law protects the buyer: payments follow construction progress or are secured by a bank guarantee (§§ 3, 7 MaBV). A buyer registered as a merchant, such as a GmbH, can waive that protection in a separate document — and some developers ask for exactly that (Part 6).

Implications for investors

1. Treat a rebuild as a vote for the location, not for the terms. A retailer that commits again to a site it has traded from for decades gives one of the strongest signals of location quality; who pays for the new building, and at what rent, decides whether the landlord shares in it.
2. Read the development plan as closely as the lease. It shows whether an enlargement — the silent reserve in every portfolio — needs new planning permission, and what the building can become if the tenant ever leaves.
3. Build the relationship before the deal. Developers allocate the best projects to buyers they know — buyers who decide quickly, fund reliably and do not renegotiate after due diligence — and that access is built over years.
Questions to ask about any new store:
• Is it a new site or a replacement for a store the retailer has operated before — and for how long?
• Is the building permit final, and does it cover the store's full sales area and use?
• What are the lease term, the extension options and the indexation clause?
• Which developer built it, and what is its track record with this retailer?
• What energy features does the building have — and who owns them? A property company that sells solar power or charging itself keeps its extended trade-tax reduction only within statutory limits (Part 9).
Sources: BauNVO § 11(2), (3); BVerwG, judgment of 24 November 2005, 4 C 10.04; state and regional development plans; MaBV §§ 3, 7; BGB §§ 542, 543, 550, 578; GewStG § 9 no. 1; BNP Paribas Real Estate, Grocery Investment Market Germany Q4 2025; Gordon Real Estate Group transaction experience.
Photo: Artem Labunsky / Unsplash
This article is general information and not investment advice.
2026-10-09 12:10