Tegut Sale – When Competition Law Meets Real Estate

The Real Estate Perspective

For the real estate industry, it is important to note that Tegut does not operate a uniform property portfolio. Its network includes smaller neighborhood stores, urban grocery outlets and traditional supermarkets, often ranging from approximately 800 to 1,500 sqm of sales area. In addition, the portfolio includes significantly smaller smart stores as well as logistics, production and administrative properties.

Daniel Kroppmanns, Head of Retail Agency Germany at Cushman & Wakefield:
“The central question is therefore not only whether the transaction will be completed, but also which operator will take over which location and under which retail concept the property can continue to operate. A Tegut store cannot always be converted into an Edeka, Rewe, Netto or Penny format without modification. These concepts differ in terms of sales productivity, storage areas, delivery requirements, parking needs, technical infrastructure, fresh-food counters and product range.”

For property owners, a change of operator may trigger investments in refurbishment, building services, fire protection systems or the redesign of floor layouts. In addition, lease agreements must be reviewed for provisions such as consent requirements, operating obligations, use restrictions, non-compete clauses, replacement tenant clauses or special termination rights.

Special Case

The 38 Critical Stores

Particular attention should be paid to the 38 locations whose acquisition by Edeka has been identified as problematic by the Federal Cartel Office. These stores could be removed entirely or partially from the Edeka transaction package. For the affected properties, several scenarios are possible:

1. Acquisition by another grocery retailer
2. Renegotiation with the property owner
3. Alternative retail use, or, in the least favorable case
4. Temporary vacancy

An alternative operator will not necessarily enter the lease agreement under the existing terms. Tenant improvement contributions, rent-free periods, refurbishments or adjustments to rent levels may all become part of new negotiations. If continued use as a supermarket is not feasible, other options may include drugstores, non-food discount retailers or the subdivision of the space into smaller units, depending on location characteristics and planning regulations.

3 Perspectives on Restructuring

1 - Property Owners

Grocery stores are generally among the most stable uses within the retail real estate market. They often benefit from long-term lease agreements, reliable cash flows and a relatively high degree of alternative usability. Particularly in city centers and district hubs, they also serve as important footfall anchors. Their loss can therefore affect not only the individual leased unit but also adjacent retail space and the value of the overall property.

Daniel Kroppmanns:
“The transaction offers owners an opportunity to replace Tegut with financially strong operators such as Edeka or Rewe. However, for locations subject to antitrust concerns, there may be longer transition periods and additional capital expenditure requirements. Property owners should therefore review lease agreements, technical specifications and alternative use concepts at an early stage.”

2 - Tenants and Operators

For Edeka and Rewe, the transaction is about more than expansion. Well-positioned grocery stores represent strategic locations that are difficult to replace in the short term due to limited land availability, high construction costs and lengthy planning and permitting procedures.

Daniel Kroppmanns:
“This is especially true for urban locations. While they often lack extensive parking facilities or ideal logistics conditions, they provide visibility, customer proximity and access to established catchment areas. Acquiring an existing store network enables retailers to secure these locations without undertaking lengthy development projects.”

3 - Consumers

For consumers, the priorities are short travel distances, reliable opening hours and an appropriate product range. Where a Tegut store serves as the primary neighborhood supplier, its continued operation has a direct impact on quality of life and the attractiveness of the location. At the same time, increasing market concentration carries risks. Fewer independent operators may reduce consumer choice, product diversity and competitive pressure. This also affects regional suppliers and organic products, which have traditionally played an important role within Tegut’s offering.

"A sustainable solution must therefore achieve three objectives: preserving locations, ensuring effective competition and maintaining the economic viability of the properties. If this balance can be achieved, the restructuring could provide many locations with a long-term future despite the disappearance of the Tegut brand.”, Daniel Kroppmanns.