One in three supermarkets in community centers too small for healthy operation
One-third of all supermarkets in convenience centers are smaller than 1,000 square meters of retail sales floor space. This is too small in these types of centers to operate profitably. While supermarkets want to scale to stay future-proof, they often run into physical limitations in neighborhood shopping centers. A shame, because that is precisely where the key to value creation for investors lies: by strengthening the supermarket offering, centers can not only maintain their vitality, but also increase their property value.
The silent engine of retail
Within the Dutch retail sector, the food segment remains the stable force. Where non-food has been struggling for years due to the shift to online and changing buying behavior, supermarkets continue to maintain sales. In 2023, supermarket sales passed the €50 billion mark for the first time, and the forecast for 2025 is over €51 billion.
However, this growth is mainly due to price increases. Volumes have shown a slight decline. At the same time, labor, energy and real estate costs are rising. The result: margins are under pressure and total operating costs are increasing as a percentage of sales. For supermarket organizations, this means that efficiency and scale are crucial to remain profitable.
Why size makes a difference
The scale of supermarkets has been increasing for years. More and more formulas exceed the limit of 1,500 m² of retail sales floor space. Larger stores are more profitable because they:
- operate more efficiently through economies of scale,
- provide more room for new revenue models such as retail media and fresh concepts,
- be able to invest more sustainably in energy-efficient facilities and technology.
In short, scale makes the difference between growth and contraction.
Smaller supermarkets do not have that space. They face higher operating costs per square meter, a more limited assortment and less room for innovation. Independent retailers are particularly affected. Since the tobacco ban in 2024, many small stores lost at least 10 to 15% of their sales, which is a major blow to their profitability.
Recent Locatus market data shows that about one-third of all supermarkets in convenience centers are smaller than 1,000 square meters of retail sales floor space. This means that a significant portion of the current supply is structurally too small for healthy operation.
“Supermarkets are at a tipping point,” says Jeroen van der Weerd, supermarket geographer and owner of Bureau van der Weerd. “They will choose locations in the coming years where economies of scale are possible. If the investor or owner does not think along, they run the risk of vacancy or declining rental security.”
District shopping centers as an opportunity for value creation
Yet it is precisely in neighborhood shopping centers that the greatest opportunity lies. Many centers were built at a time when 800 to 1,000 m² was the standard. Today, that is simply too small to operate future-proof. At the same time, many centers struggle with vacancy or fragmented layouts.
Expanding existing supermarkets or adding an additional supermarket can significantly increase the center’s pulling power. “A strong supermarket is a daily crowd puller,” says Van der Weerd. “More visitors means more sales for surrounding stores. And that makes the entire center stronger.”
Increasing the supermarket offering has an additional benefit: it helps reduce vacancy. By combining meters or rearranging them, it creates scarcity in current retail space, which increases the value per square meter. For investors, this is a direct opportunity to improve the performance of their properties.
Investing in convenience: time for focus
According to Ellen Tak, who was responsible for Altera’s investment strategy for many years and successfully led the strategic change in direction to focus entirely on convenience from a mixed-use portfolio, the current market demands sharper choices.
“Supermarket real estate is no longer automatically a safe haven,” says Branch. “The yield gap between strong and weaker locations is widening. High-quality supermarkets with good tenants and strong positions remain attractive, but locations without future potential are rapidly losing value.”
Investors who respond to the need for supermarket scale and positioning, on the other hand, can structurally strengthen their portfolio in terms of both stability and returns.
Stronger through collaboration: data and strategy combined
To support investors in this, Jeroen van der Weerd and Ellen Tak combine their expertise. From Bureau van der Weerd, they combine Jeroen’s market and data expertise with Ellen’s investment strategy and portfolio insights.
“We find that investors need factual, independent advice,” says Branch. “The days of generic investment decisions are over. With data, insight and strategy, we help them make future-proof choices.”
To create space is to create value
Supermarkets remain the stable engine of retail, but that engine needs space. By responding to the need for scale within neighborhood shopping centers, investors can not only contribute to better functioning supermarkets, but also structurally increase the value of their properties. In a market where returns are increasingly determined by quality and future-proofing, space is the key to value creation.
