By Steffen Hofmann, Managing Partner, ambas Real Estate
Real estate cycles favour different qualities at different times. For several decades, complex development projects and the creation of an outstanding customer experience dominated investment strategies. In retail, success was defined by the ability to generate footfall—sometimes at the expense of operational simplicity. That paradigm has now shifted. Higher financing costs, leaner budgets and more selective capital allocation are driving a renewed focus on income durability, cashflow visibility and downside protection. In this environment, grocery-anchored retail parks seem to have re-emerged as the most popular asset class for core investors in European retail.
Necessity Beats Experience
Retail parks have never been the most glamorous part of the retail landscape. Often, they lack the architectural appeal and experiential dimension of perhaps more sophisticated shopping centres and urban mixed-use assets. What they offer instead is clarity of purpose. Anchored by grocery, drugstores and other essential goods providers, they serve local catchments with convenience-led formats. This positioning underpins stable, necessity-driven footfall that is far less exposed to discretionary spending cycles. Customers do not travel for experience twice per week—however, they stop to fill their fridge several times per week on their way home. In a market where predictability is increasingly scarce, that is a compelling proposition.
Diversification by Design
A key strength of retail parks lies in how capital can be deployed from a wider investor universe that also comprises smaller fund management platforms. Unlike large, single-asset allocations, retail parks allow for granular allocation across multiple assets, lot sizes and locations. For a given investment volume, capital can be spread across several assets rather than concentrated in a single exposure. The result is lower concentration risk and greater flexibility in portfolio construction. Investors are able to diversify not only geographically, but also across micro-locations and asset sizes—something structurally harder to replicate in larger-format retail.
Loved by Lenders
Another defining characteristic of the segment is its strong lender appeal. Retail parks typically comprise a limited number of large-format tenants secured on long leases, resulting in longer WAULTs often exceeding five to seven years. Importantly, these WAULT profiles can be optimized in the course of a transaction by way of active asset management. Renewing one or two key anchor leases can materially increase overall lease duration. This is critical in a financing context, as lenders typically align loan tenors with lease maturities. The ability to create financing-compatible structures with relatively limited intervention makes retail parks not only easier to underwrite, but from a lender’s perspective more straightforward to finance.
Repricing—Without Dislocation
The interest rate shift has, inevitably, impacted the sector. In simple terms, prime retail park yields for best-in-class properties in core Western Europe have moved from previously 4.0%–4.5% pre-rate cycle to around 5.0%–5.5% today, with secondary assets or less sought-after investment regions trading above 6.0%. The sector’s income stability and lower volatility have mitigated the degree of correction. Investor demand picked up quickly again.
Simplicity Wins
At the core of the investment case is structural simplicity. Retail parks require significantly less technical infrastructure than multi-level buildings, coming along with lower operating costs, reduced service charge burdens and less intensive day-to-day management. There are simply fewer moving parts—both physically and operationally. This translates into a more efficient operating model, benefiting both landlords and tenants.
Stability has its Limits
That said, the investment case comes with clear trade-offs. Very much depending on the quality of underlying lease contracts, retail parks are not necessarily a growth-driven asset class. Rental growth is typically modest, and upside can be structurally limited. Lease structures are often less institutional than in the prime shopping centre sector or in market-leading outlet formats. Contract quality can vary, indexation is not always fully inflation-linked, and long-term tenant options can constrain re-letting flexibility. In addition, investors must navigate competition clauses and planning restrictions, particularly in out-of-town locations where tenant mixes are often regulated. These constraints limit asset management optionality—even as they underpin income stability.
Smaller, Sharper, More Efficient
The segment is also undergoing structural evolution. Large-scale hypermarkets, historically often comprising more than 15,000 square metres of lettable space, are being rightsized and reconfigured. The direction of travel is towards more efficient anchor store formats of between 5,000 and 8,500 square metres, with a sharper focus on fresh food and beverage, core grocery and convenience retail. Non-food ranges are being reduced, and space is being optimised for productivity. This reflects a structural realignment rather than a cyclical adjustment.
Value-Add, but Incremental
Opportunities for value creation remain, particularly within ageing stock. Many retail parks are operationally sound but physically dated. Targeted interventions—such as façade upgrades, ESG integration or layout optimisation—can enhance tenant appeal and support moderate rental growth. However, any repositioning must reflect occupier economics. Retail parks are heavily exposed to fast-moving consumer goods, where margins are thin and occupancy cost ratios must remain low. This inherently limits the scope for rental uplift. Value creation is therefore possible—but incremental rather than transformative.
Defensive by Nature
Retail parks exhibit clear core and core-plus characteristics. Their investment case is defined by income visibility, cashflow resilience and low volatility—not by extraordinary growth or untapped repositioning potential. Investors accept a lower return profile in exchange for stronger downside protection and more predictable performance. In the current market environment, this trade-off remains highly attractive on a risk-adjusted basis. Looking ahead, retail parks are likely to become a core component of many institutional portfolios. Grocery-anchored schemes, in particular, continue to benefit from strong pan-European investor demand, supported by their resilience, scalability and lender acceptance.
Simple—and Structurally Advantaged
The appeal of retail parks is ultimately straightforward: simplicity, stability and predictability. In a market defined by uncertainty, that is a structural advantage.
From our perspective, this does not position retail parks in opposition to other retail formats, but rather highlights their specific strengths within a broader, diversified investment landscape.
For investors prioritising single-digit income over double-digit total returns, retail parks are no longer a niche allocation—they are a basic one.
About
Steffen Hofmann is Managing Partner of ambas Real Estate, the company he founded in 2014 under the name iMallinvest Europe. With more than 25 years of experience, he is a specialist in retail real estate and international investment markets, having worked across nine European countries including Germany, Austria, the UK, Spain, Italy, and Turkey.
Before founding ambas Real Estate, Steffen worked for Henderson Global Investors and Commerz Real. He is a member of the Advisory Board of the German Council of Shopping Places (GCSP) and lectures at the International Real Estate Business School (IREBS), where he contributes to the education and development of real estate professionals.
ambas Real Estate GmbH is an independent, strategic investment and asset management advisory firm with a strong focus on retail real estate and mixed-used properties. ambas advises owners, developers, occupiers and operators of retail assets in their sector specific acquisition and disposal programs, including deal brokerage and transaction-related advisory services. Founded in 2014, the company’s track record shows a total transacted deal volume of approximately €3bn. Its operating offices are based in Mainz (Rhine-Main) and Hamburg, Germany.
For more information: www.ambasrealestate.com
