Grocery Retail Property Market 2025/Q2: Business as Usual

The grocery retail property market stands out from other commercial real estate segments due to its defensive nature: food and essential consumer goods are purchased regardless of economic cycles. The sector has once again demonstrated strong resilience, with its predictable cash flows offering investors security through challenging market conditions. Even in uncertain times, occupancy rates for grocery-anchored retail premises have remained high. 

E-commerce has placed pressure on many retail properties and their future demand, but the grocery sector has been far less exposed. According to KTI, retail space occupancy levels remain high. Publicly listed Cibus – one of the most significant players in Finland’s grocery property market – managed to maintain an occupancy rate of 95.3% in Q2 2025 despite market uncertainty. Strong portfolio occupancy reflects the company’s ability to succeed even in challenging conditions. 

“Over the decades, Finland’s grocery market has become highly concentrated and, thanks to well-considered decisions, the grocery retail businesses of Kesko and S Group have achieved internationally leading profitability levels. This is also reflected in the property market: grocery property tenant portfolios are stable, credit losses are rare, and occupancy rates remain high. The sector is well-positioned as investor interest in real estate grows, and recent transaction activity reflects this confidence. Examples include Prisma Properties (SWE) entering Finland and Cibus’ €61 million acquisition of five Tokmanni stores and one Prisma hypermarket,” says Anton Takkavuori, Real Estate Analyst at Retta Management. 

Source: Cibus 

Large Stores Lead – Small Stores in a Supporting Role 

The structural transformation of retail has shifted consumption toward larger stores. Rising food prices have accelerated this trend, as larger supermarkets can offer wider assortments and lower prices than small convenience stores. Economies of scale in logistics and purchasing, along with higher customer volumes, have further strengthened the position of retail chains. Today, the provision of groceries in urban areas relies heavily on large-format stores, while small convenience shops are losing ground – their numbers have declined steadily year after year. 

The number of traditional grocery stores has decreased dramatically: in 1978 there were 9,398, compared with just 2,647 in 2024. The number of stores under 400 m² has halved in 15 years, while large-format stores over 1,000 m² (supermarkets, department stores, and hypermarkets such as Citymarket, Prisma, and Minimani) now account for about 70% of the market. 

Source: NielsenIQ Grocery Store Register 

In remote locations, vacant grocery premises can lose almost all their value – a typical example of residual value risk in the grocery property sector. On the other hand, when Kesko or S Group decide to invest in a particular municipality or site, it signals strong confidence and often carries broader social and infrastructural significance. Smaller stores continue to play an important role in maintaining local services and supporting the viability of rural areas. For example, Tokmanni has reported receiving over one hundred proposals from municipalities to establish separate Spar stores. 

The market position of the major chains continues to grow, which is reflected in their market shares. S Group’s share has steadily increased since 2021, reaching 48.8% of grocery sales in 2024, compared with Kesko’s 33.7%. Since 2018, S Group has opened ten new Prisma hypermarkets, while only one new K-Citymarket has been launched. The past few years have been dominated by S Group, with 2024 being particularly the “year of Prisma” – the only hypermarket chain to significantly grow its market share. Kesko, meanwhile, is seeking to strengthen its position through new Citymarket openings in the coming years. 

In 2025, Kesko’s most significant ongoing projects include Citymarkets in Vantaa Kivistö, Lempäälä Ideapark, Lahti Paavola, Kuopio Haapaniemi, and Porvoo Jokiranta. While Kesko’s market share losses in grocery retail have slowed, K-Citymarket expanded its share in the hypermarket category during Q2 2025. 

Change is the Only Constant 

Shopping centers located at major public transport hubs, many of which were built or expanded in the late 2010s, attract customers with broad assortments and excellent accessibility by both public transport and car. These have challenged retail premises in central Helsinki. After difficult years, however, the city center is recovering: the vitality index rose by +4.5% compared to last year, with an increase in shops and restaurants and a second consecutive year of declining vacancy rates. 

Source: National Vitality Results, Salokorpi Information Services 

Consumption has shifted toward lower-price products, a trend visible also in downtown Helsinki. Rusta’s much-discussed 2,400 m² store opening, along with the arrival of several discount retailers, illustrates the growing popularity of discount chains and large hypermarkets. On a broader scale, discount retailers such as Normal, Jula, Tokmanni, and Puuilo have systematically expanded their store networks across Finland. 

E-commerce has reshaped consumption patterns, particularly affecting specialty retail properties. Grocery retail is not immune to these effects but remains significantly less exposed. Online grocery sales grew by 11% in 2024, but in Finland the sector is still in an early stage: with a total grocery market of €23.5 billion, online sales account for only about 3%. S Group’s CEO has estimated that the share could rise to nearly 4% by the end of 2025. 

Source: NielsenIQ Grocery Store Register 

In Finland, online grocery retail remains unprofitable, and achieving profitability requires both operational improvements and significantly higher sales volumes. Greater scale drives efficiency and builds the foundation for long-term profitability. In the U.S., Amazon’s recent moves in grocery e-commerce are aimed at chipping away at Walmart’s market share, likely spurring further innovation. 

In Finland, S Group’s HOK-Elanto has also invested heavily in online grocery: it opened one of Europe’s largest online grocery fulfillment centers in Vantaa – the largest single investment in its online grocery operations to date. 

Boring is Profitable 

Consumers’ shift toward lower-cost shopping channels and the growth of e-commerce have reshaped the grocery property market, but overall these trends have reinforced the position of leading chains. Kesko and S Group have succeeded with their strategic choices, and continued success will depend on staying at the forefront of developments. 

“From an investor’s perspective, the strength of grocery retail properties lies in their defensiveness, predictable cash flow, and long-term leases. Even amid retail’s structural transformation, the sector remains a safe haven. The strategic choices of major chains, ongoing concept development, and tracking of international innovations ensure that grocery properties will continue to play a strong role in both consumers’ everyday lives and investors’ portfolios. Large hypermarkets’ business model continues to demonstrate solid profitability, driven by steadily growing demand, whereas e-commerce is still facing challenges in reaching profitability,” summarizes Anton Takkavuori. 

Sources: Kaupan tila, Helsingin Sanomat, KTI, Finnish Grocery Trade Association, Statistics Finland 

Additional Information:

Anton Takkavuori
Real Estate Analyst
Retta Management
anton.takkavuori@rettamanagement.fi
Puh. 0400 853 528

Customized market reports also available on request!