+++ CORONA AND HOW TO CONTINUE +++
"People always eat". The proof: all food retail sales channels increase in sales between 12% (drug stores), 13% (discounters) and 16% (food retail full-range). The product groups flour (+126%), rice (+112%), canned ready meals (+106%), soups/stews (+89%), pasta (+72%) experienced extraordinary growth rates. In addition, the rapidly increasing sales of skin disinfection (+569%), hygiene/sanitary cleaner (+189%), wet cleaning wipes (+154 %), soap (+111 %) Household gloves (+108%), and toilet paper (now "only" +71%) (Source: Lebensmittelzeitung).
So, as an investor, should you buy supermarkets, at any cost?
The sober analysis shows that real estate is generally a pro-cyclical asset class, rents and purchase prices rise and fall with the ups and downs of the business cycle; In the case of commercial real estate in the local supply, however, the clocks go at their own, we think, more sustainable pace.
The group tenants/branchists have concluded long-term contracts and maintaining local supply is in everyone's interest. It is not yet clear what financial impact the coronavirus crisis will have on households in the coming months.
However, the Corona crisis refutes the often claimed housing bubble in Germany. Such a shock would otherwise have brought a bubble to a halt. And the comparison with the 2008 financial crisis does not fit either. In recent years, construction activity has always been below demand for construction, and banks have also lent only moderately.
Due to the limitations and the general uncertainty, only a slowdown and thus a decline in the volume of transactions in the retail investment market can be expected, rather due to a lack of supply and practical-technical limitations.
The Corona Crisis’ duration will be the deciding factor for the value-based performance in the end. The longer the crisis lasts, the more likely individual property owners will find themselves in payment difficulties and forced to sell. On the other hand, some investors will postpone planned transactions, partly for health reasons, partly because they do not yet know what will happen to their own businesses. So a little more supply, a little less demand, but we see already more demand from other investor groups, according to our experience in other crisises. Prices will neither explode nor shrink significantly, whatever scenario you assume.
Select retailers such as supermarkets, drugstores and pharmacies are becoming more present in consumers’ minds again regarding their original supply function: buying supplies instead of buying experiences. Many other companies and industries, especially the non-filiated non-food SMEs are at risk of massive losses. It remains to be seen whether the governmental financial aid will arrive on time and be sufficient. We expect individual insolvencies within a few weeks.
Corona has created an economically exceptional situation in which the trade itself is not to blame. The big landlords will accommodate their tenants’ potential liquidity bottlenecks as best they can. Crises such as these can only be met with a willingness to cooperate. Only an end to the health risk situation will bring customers back to the shops, with consumer spending only gradually getting back to pre-COVID levels.
A temporary effect: the demand for warehouse space has exploded in recent weeks, because the so-called stranded goods, which cannot be distributed due to the closure of the shops, have to be stored temporarily.
On a societal level, it is not only about the economic future of individual companies, but also about how our cities will function in the future. The picture will change, a little more abruptly than in previous years.
Only one thing is certain: the properties used for daily local supply remain in demand and are resilient.
That's why you should work with us:
Are you looking for a long-term, secure and profitable investment? Interested in retail properties with high
quality long-term tenants? You expect quick access to a favourable solution through a competent negotiating partner? Then you’ve made the right choice with Handelsimmobilien Schubert!
For 30 successful years, we have specialised in retail and other high-yield commercial properties, many of which are occupied by long-term tenants.
Our decades of experience represent just one of the reasons why you should work with us.
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Contrary to popular opinion, the retail food trade currently finds itself in a growth cycle. The top companies are growing by 1.9% - 3% on average, which is remarkable for brick-and-mortar businesses. Of course, there have been many attempts to break into online commerce, but they have hit up against some hard limits: freshness, uninterrupted cooling in the delivery chain, availability of end customers to accept home deliveries, returns management – plenty of obstacles must still be overcome or present very time-consuming challenges ... > read more