Belfast Telegraph

Monday 22 December 2014

Supermarkets cut back on megastores

Tesco has been accused of sitting on land that could be used for housing
Tesco has been accused of sitting on land that could be used for housing

Supermarkets have slammed the brakes on their race for space and downsized plans for new sites to their lowest level since the 2008 financial crisis.

Grocery retailers proposed 15.2 million sq ft of new shopping space at the end of March, compared with a high of more than 18 million sq ft in 2010, when giant out-of-town stores were seen as the future for the industry.

But the big four supermarkets have since come under increasing pressure from discounters such as Lidl and Aldi, which plan to double the number of their smaller retail stores in the next decade as they enjoy record sales.

The figures from property agent CBRE also show the amount of new shopping space with planning permission and under construction fell 30% on the year to 2.5 million sq ft, with retailers scaling down their sites to meet changing customer habits.

CBRE retail director Christopher Keen said: "The reason for the shift to smaller stores is in part a response to changing consumer shopping patterns, but also because they are lower capital expenditure to deliver, have less impact on the trade of existing stores and are easier to secure planning permission for."

Despite reining in their expansion plans overall, supermarkets are still sitting on nearly 30 million sq ft of space that has been given permission to become a grocery store but is not under construction, up around 14% on the year.

Last month Tesco said it would use land it had previously earmarked for new supermarkets to build 4,000 homes. It had come under fire for hoarding land on which an estimated 15,000 homes could be built.

Britain's largest supermarket has also become an unfortunate poster child for the plight of the country's larger grocery retailers. The group recently ousted chief executive Phil Clarke when it announced another profit warning after suffering its worst sales decline in at least two decades.

Meanwhile, sales at Aldi and Lidl, both based in Germany, have jumped 32% and 19.5% respectively over the year.

CBRE said the two companies have rolled out 779 additional stores since 1998 and will continue to chip away at the other supermarkets with their expansion plans, but at a rate that is still too slow to pose a significant threat to the main grocery players.

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