The Overlooked Indicator Every Grocery Real Estate Investor Should Know

Most investors judge the strength of retail real estate by looking at tenant names, locations, or yields. These factors matter. But they don’t always show whether a tenant’s income is sustainable or whether a store is likely to remain profitable over time.

There is another indicator that can often provide deeper insight into the strength of a grocery property’s income: how comfortably the tenant can afford to operate from that location.

This measure is the Occupancy Cost Ratio, or OCR.

What is OCR?

OCR measures the relationship between a store’s sales and what it pays in occupancy costs. In simple terms: OCR = Total occupancy costs / Store turnover

Occupancy costs typically include base rent and may also include service charges and property-related costs, depending on the lease structure.

For example, if a store generates €10 million in annual sales and pays €400,000 in occupancy costs, its OCR is 4%.

In grocery retail across Europe, discounters typically operate at lower OCR levels, supermarkets at moderate levels, and hypermarkets at comparatively higher levels. Exact ranges vary by market and store format.

Important context: OCR is not a full measure of profitability. It does not include labour, logistics, or overhead costs. It is best understood as a reference point for assessing whether rent appears sustainable relative to store sales, and should be considered alongside other factors such as tenant strength, location, and lease terms.

Why OCR Matters in Grocery Real Estate

Unlike many other types of retail, grocery stores benefit from recurring demand. However, store profitability still depends on how much turnover is absorbed by occupancy costs.

Low occupancy costs relative to turnover give tenants flexibility to absorb rent increases, invest in improvements, and maintain operations. High occupancy costs can limit a tenant’s ability to handle rising expenses or reinvest, potentially leading to lease renegotiation or reduced investment.

For investors, OCR provides a practical way to assess whether rent levels are proportionate to store performance.

What the Data Shows

The ‚Appetite for Insights 2025‘ report by edyfi, an analytics company within the Greenman Group, analyses grocery OCR across 11 European markets and multiple store formats. Key findings:

Discounters operate with lower OCR levels, supported by high sales density and efficient cost structures

Supermarkets fall within moderate OCR ranges, backed by consistent customer demand

Hypermarkets show higher OCR levels, reflecting larger formats and higher space requirements

The report also highlights a structural shift: hypermarket share across surveyed countries declined from 20.3% in 2018 and is projected to fall to 17.5% by 2028. Performance in this segment remains highly dependent on location and local market conditions.

Understanding the Implications

A relatively low OCR suggests:

Greater ability to absorb rent indexation

Higher likelihood of lease renewal

More capacity to invest in upgrades, including energy efficiency

Lower risk of closure due to occupancy cost pressure

A higher OCR may signal tighter margins between turnover and property costs. While not automatically unprofitable, these tenants have less room to absorb rising expenses. In challenging conditions, this can lead to lease renegotiations, downsizing, or closures.

Why OCR May Matter Even More in 2026 and Beyond

Several structural trends increase the relevance of OCR analysis:

Food inflation has made consumers more price sensitive, supporting value-oriented retailers while pressuring stores with tighter margins

Discounters continue gaining market share with operating models relying on low occupancy costs relative to turnover

Energy efficiency and sustainability requirements will demand capital investment—stores within sustainable OCR ranges are better positioned to absorb these costs

Elevated operating costs across Europe mean stores with limited headroom may come under pressure more quickly

What This Means for Investors

In a sector defined by relatively stable demand, differences in cost structure can still have a meaningful impact on long-term performance. OCR helps answer a simple but important question: how easily can a tenant afford to occupy a given property?

Understanding OCR alongside location quality, tenant strength, and lease terms provides a more complete view of income durability and can help identify properties positioned for long-term resilience. For those evaluating grocery-anchored assets, requesting OCR data during due diligence may reveal risks and opportunities that traditional metrics alone cannot capture.

Important Considerations

Before making any investment decision, please consider:

OCR is one analytical tool and should not be relied upon in isolation

OCR does not measure profitability and is not predictive of future store or fund performance

Store performance can change over time

Market conditions, competition, and regulation can affect turnover

Property values and rental income are not guaranteed

Real estate funds structured as AIFs and ELTIFs are long-term investments and are not suitable for investors who require short-term liquidity

Past performance is not a reliable guide to future results

This article is for informational purposes only and does not constitute investment advice. Investors should consider their personal circumstances, read the relevant fund documents including the Key Information Document (KID), and where appropriate, seek independent financial advice before investing.

Greenman Investments is authorised and regulated as an Alternative Investment Fund Manager (AIFM).

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