More than a dozen large London supermarket sites are being brought forward for residential-led redevelopment as cash-strapped operators look to profit from the housing shortage.
The supermarkets are keen to cash in on London’s increasing land values as they continue to battle against each other in an aggressive pursuit to remain price-competitive.
Large, multiple-acre sites in central London with car parks can accommodate hundreds of homes and are worth tens of millions of pounds, which supermarket operators want to realise as they try to drive efficiencies in their portfolios.
“Changing consumer habits have been a driver for the change through the effects on their trading performance,” said Will Andrews, lead director for out-of-town retail and leisure at JLL. “Operators are working hard to get best value from their existing floorspace: both from an alternative-use perspective and from successful stores adding in a mixed-use and generating value from unused airspace.”
However, while the big four supermarkets may be reducing store footprints around the country to cut costs, within the M25 they have been less willing to do so. Average daily turnover can reach £300,000 for inner London superstores, according to Knight Frank.
As a result, sites are now being brought forward through a number of partnership models that allow supermarket operators to keep their retail footprint and maintain day-to-day retailing while realising the residential value of sites.
Estates Gazette has identified 15 sites either being sold, coming to market, or with planning that could accommodate as many as 7,500 homes with a total value of more than £3bn.
Recent agreements include the potential redevelopment of a Morrisons in Camden, NW1. Housebuilder Barratt is working up plans for a residential-led scheme for the 4.9-acre site, with an option to acquire the project once planning is obtained.
A portfolio of four inner London Tesco stores, including sites in Brixton, SW2, and Hackney, E8, has also been offered to housebuilders.
Nick Parr, partner at Knight Frank, who has advised a number of supermarkets and other large retailers about over-store development, said residential sales values breaking through the £550 per sq ft barrier has been key to the change in strategy by the supermarkets.
“It is the tipping point where developing out a basement, compensating for a loss of retail income, and taking on the considerable construction costs all work out,” he said. “These are big projects, so values have to be over and above to make them viable.”
Supermarket sell-offs: inner London sites
Sainsbury’s
Ladbroke Grove: 20-acre site with potential for tie-up with adjacent landholders Ballymore and National Grid and capacity for up to 2,000 homes
Ilford: 4.5-acre site, for which planning has been submitted for 700 units
Whitechapel: 2.8-acre site for which planning has been submitted for 560 units
Tesco
Oval: 2.4-acre site adjacent to National Grid gasholders. Estimated capacity of more than 400 flats
Brixton: 2.8-acre site with an estimated capacity of more than 400 flats
Hackney: 2.7-acre site for which a 2010 application for 113 flats was rejected
Bow: 6-acre site with plans for 454 homes dating from 2010
Asda
Canary Wharf: 8.8-acre site with planning permission for 850 homes
Morrisons
Camden: Tie up with Barratt Homes to develop plans for a residential-led scheme on 4.9-acre site with an estimated capacity of more than 400 flats
Streatham: 1-acre site
• To send feedback e-mail alex.peace@estatesgazette.com or tweet @egalexpeace or @estatesgazette
