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Growth in supermarket development pipeline set to continue

New research has revealed that the development of new supermarkets in the UK shows no sign of slowing and has grown by more than half since the credit crunch despite increasing economic uncertainties.


Growth in supermarket development pipeline set to continue

The study by commercial real estate services firm CBRE found that the supermarket pipeline in the UK has increased by 57% since September 2007 and the amount of new space in the pipeline at the end of the first half of 2012 increased to 5.34 million sq ft.

Supermarkets now account for 38% of all shops in the development pipeline, up from 25% four years ago, and 39% of space under construction. The upturn in supermarket expansion activity is now broadly based, taking in both High Street and out-of-town stock; new development and new store acquisition.

Although the speculative shopping centre and retail park pipeline cumulatively declined by 13.6 million sq ft over the 2007-2011 period, the total shops pipeline – because of the grocery development upturn – has still grown by over 4 million sq ft.

Chris Keen, director at CBRE, explained: "There are not many sectors of the UK property market that are growing rapidly these days, but supermarkets are a notable exception. The withdrawal of speculative developers following the onset of the 2007 credit crisis provided supermarkets with a rare window of opportunity to increase expansion activity levels, an opportunity, most key grocery players grasped with alacrity.

"The main push continues to be for edge and out-of-town space because of its accessibility. Grocers are, however, also acquiring additional High Street stores, particularly in conurbations where it is more difficult to obtain planning permissions for superstore development."

CBRE said the growth surge is not affecting every grocery format in the same way. Difficulties have recently emerged at the very large store end with some grocery majors reporting disappointing non-food sales growth. Given the investment ploughed into non-food merchandising in recent years by grocers, CBRE said the announcement that some major hypermarket development programmes were being axed was unexpected, particularly as grocers’ share of non-food sales have almost doubled over the last decade to 14%.  In practice, however, CBRE says that nothing has yet filtered through to pipeline figures

Keen added: "With speculative development at a recessionary low, grocery development is often the only game in town and could remain so for a lengthy period. We do not expect the supply of new supermarkets to dry up while non-food and service operators retreat from the High Street and smaller markets.

"The internet, home delivery, and ‘click & collect’ are unlikely to fill the hole and the obvious way of tapping local, everyday non-food items and services is via supermarkets. The scramble for grocery space consequently looks set to continue."




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