New Food Retail Projects: A Privilege of “Court Developers”
The development and modernisation of supermarkets and retail centres in Germany’s prime locations is concentrated in the hands of a small, highly influential circle of so-called “court developers” — long-standing partners of the Top-4 and other Top-20 food retail operators. These developers receive mandates directly from senior management and have often worked with the major chains for decades. Most are family-owned companies, a format deeply rooted in Germany and Western Europe; the oldest have been active for over a century, and the largest — operating across multiple EU countries — generate annual turnover of up to €2 billion.
Overall, the creation of new food retail assets in Germany involves five primary stakeholders:
Because Germany built tens of thousands of brick-and-mortar food retail stores after WWII, new building permits in fresh locations are increasingly rare. What is far more common — and extremely sought after — is the comprehensive redevelopment or full replacement of an existing store. For investors, these projects are equally compelling: when a food retail operator decides, after 15–30 years of successful operation, to stay in the same established location for another 15–30 years, this serves as a powerful indicator of the site’s long-term resilience and viability.
Overall, the creation of new food retail assets in Germany involves five primary stakeholders:
- Municipal authorities, which issue (or decline) building permits;
- Food retail chains, acting mainly as tenants (and less frequently as owner-occupiers), coordinating each project to ensure compliance with their requirements for location, brand design and building specifications;
- Developer companies, responsible for securing land plots, delivering projects in close coordination with municipalities and food retail tenants, and selling completed assets to interested investors;
- Banks and other lenders — including international insurance groups — which finance projects against land and future building collateral, provided the developer can present the two “sacred” documents:
- a) a building permit, and
- b) a 30-year lease agreement with a top-rated tenant: 15 years of firm term with no early termination rights for either party, plus three 5-year extension options for the tenant (for non-food retail the norm is 12 years + 4 × 4-year options);
- Equity investors who fund the construction of the properties they intend to acquire. This structure is particularly common during periods of high interest rates. Developers benefit by avoiding excessive bank financing costs, while investors gain access to more attractive acquisition pricing, as lender margins are excluded. Investor security is ensured by Germany’s strict real estate construction laws, which prohibit advance payments: funding is released in four instalments, each triggered by the completion of a defined construction stage.
Because Germany built tens of thousands of brick-and-mortar food retail stores after WWII, new building permits in fresh locations are increasingly rare. What is far more common — and extremely sought after — is the comprehensive redevelopment or full replacement of an existing store. For investors, these projects are equally compelling: when a food retail operator decides, after 15–30 years of successful operation, to stay in the same established location for another 15–30 years, this serves as a powerful indicator of the site’s long-term resilience and viability.
Credits: EDEKA Gruppe