Featured Sector: Retail

Post-credit crunch, the major supermarkets were the principal source of investment in new retail property. Whilst the flow of new shopping centre schemes all but evaporated during 2009 and 2010, the supermarkets expanded their development programmes.

However, the last three years have seen a retrenchment in the supermarkets’ overall construction spend. This follows the decision by the two most active firms, Tesco and Sainsbury, to reign back on the development of traditional format and larger out of town stores and to concentrate on expanding their network of local convenience stores. The construction spend per square foot is on average lower for convenience stores as many of them are sited in existing premises with the construction works limited to conversion and fit out works.

More recently, in October Tesco confirmed that 14 sites across southern England previously due to feature new supermarkets have now been sold for £250 million and will be developed for residential use.

Asda is also reigning in expansion plans and improving its core estate with 95 stores refurbished at an estimated cost of £600 million to combat discount rivals. This is unlikely to be the last such move by a major supermarket.

Further retrenchment by the top four supermarket chains is now anticipated over the coming year. Falling profitability has forced a re-assessment by the majors of both their development pipeline and their current estate. Tesco, Sainsbury and Morrison have all announced store closures.

In contrast the discounters Lidl and Aldi, are continuing to expand their networks of larger stores.