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Food shoppers demand convenience

24th April 2018

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There has been significant structural change in the supermarket sector of the retail property market leading to revised store requirements of the major operators. Whilst there has not been the predicted substantial reduction in the size of food retailers’ portfolios, there has been a greater focus on how these are utilised and the type of stores which will be opened in the future.

Consumer demand is driving the boom in convenience retailing, expanding the market and pushing up rents particularly in metropolitan and suburban commuter areas where customers are cash rich but time poor. Shoppers are turning their backs on the traditional weekly shopping trip in large supermarkets in favour of smaller more frequent visits and top-up shops. The trend is driving an expansion of the convenience store format across all the major operators and industry estimates say the sector will be worth £42 billion, up 11.7%, within the next four years.

GCW is using its long-standing knowledge and expertise on food stores to focus on the growing demand in the convenience food market. It is advising retailers, landlords and investors on how to capitalise on the changing trends.

Individual operators are all expanding their offer. The Co-op says it wants 100 new stores per year between 1,500 and 10,000 sq ft and Tesco aims to take 40 to 60 stores in the next year of 4,000 to 5,000 sq ft. In parallel discounters Aldi and Lidl are taking stores smaller than those historically favoured by multiple operators and due to the pressure on suitable sites within the M25 are looking at units as small as 8,000 sq ft with no parking.

GCW is acquiring sites and stores for both Tesco and Lidl. The latest acquisition for Tesco is a 5,000 sq ft store in Creek Road, Greenwich opposite the Cutty Sark DLR station reflecting the demand for sites near transport nodes.

GCW’s investment team reports that volatility throughout the past 18 months has led investors to be more cautious, resulting in a flight to safety.  This has created a voracious appetite for the best convenience and smaller supermarkets near transport nodes. GCW has recently transacted supermarkets in Ashtead, West Hampstead, Queens Park and Wimbledon that offer investors long income with strong fundamentals supported by occupier demand.

GCW also actively advises landlords on rent reviews and lease renewals on convenience stores. The buoyancy of the market is reflected in the strong rental growth. In Hatfield GCW acted for the landlord of a 7,000 sq ft store occupied by Iceland where the rent increased from £35,000 to £52,000 pa at lease renewal and in Cheam against Sainsbury’s in a rent review where the rent increased to £65,000 pa.

MORE INFORMATION FROM clive.gillingwater@gcw.co.uk

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