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Surge in supermarket construction helps sector increase non-food market share

The supermarket sector is emerging as the big retail market share winner of the recession in the UK as the surge in supermarket development accelerates the shift in non-food market share away from town centres, according to the latest research from CB Richard Ellis (CBRE).

GENERAL MERCHANDISE

Surge in supermarket construction helps sector increase non-food market share

The increase in the number of supermarkets being constructed, which started following the economic crisis in 2007, has continued to grow rapidly said CBRE. The research showed that supermarket development in the UK has grown by 42% since the first half (H1) of 2008, increasing the amount of new space under construction at the end of the first quarter (Q1) of 2011 to 41.22 million square foot.

CBRE found that as shopping centre and retail park construction activity levels continue to contract, supermarkets is the only sector to see a sustained increase in construction activity. This is largely attributed to the retreat of speculative development of non-food shopping centre schemes, with almost 50 million sq ft of supermarket space estimated to be allocated to non-food goods.

However, despite the faster pace of supermarket construction, compared to shopping centres and retail parks, quarter-on-quarter construction activity levels are still unpredictable. The research revealed that Q3 2010 development levels were just over 4 million sq ft, with levels declining to 2.08 million sq ft in Q1 2011.  The instability is intensified by the length of time it takes to get larger schemes through the planning process, which often results in surges in construction activity as groups of schemes receive planning permission.

Christopher Keen, director, retail lease consultancy, CBRE, commented:
“In some markets the lack of alternative development seems to be resulting in some relaxation in planning attitudes towards supermarkets as they often the only viable development option and can provide an invaluable boost to the local economy in the form of new investment and subsequently new jobs.  Another important attribute of supermarkets is their potent anchoring characteristics. Non-food retailers continue their retrenchment into larger trading locations, weakening shopping offers in many smaller high streets. Supermarkets, because of the high levels of shopper footfall that they can generate, are emerging as a potent anchoring alternative to strengthen failing areas.”

As supermarkets, unlike other retailers, are not dependent upon speculative development funding to meet expansion requirements CBRE said this puts supermarket retailers in an unusually strong position. It enables them to take advantage of vacancy increases in secondary markets and high streets, often trading from space that is no longer viable for non-food retailers.  Despite the recent slowdown in non-food sales growth, the demand for additional modern, large supermarkets in out-of-town locations remains exceptionally strong and the primary focus of grocers’ expansion plans said CBRE.


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