Competition intensifies to buy UK supermarket stores despite uncertainty

Monday 26 Could 2025 6:00 am
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Sunday 25 Could 2025 5:24 pm

Actual property traders are more and more competing to snap up UK supermarkets as a scarcity of latest areas and sluggish planning processes weigh on developments.

Grocery properties are “proving to be one of the crucial resilient and engaging funding sectors”, in line with analysis by Colliers.

Consultants at the actual property agency stated worldwide and UK traders are nonetheless searching for to money into the trade regardless of excessive borrowing yields and uncertainty within the wider financial system.

In recent times, many supermarkets and different retailers have sought to spice up their stability sheets by promoting off properties and leasing them again below contract.

This has led to the expansion of actual property traders and trusts targeted on snapping up belongings within the sector.

Colliers stated the restricted variety of supermarkets accessible on the UK market lately and discount in rates of interest have made the capability to snap up websites far more aggressive over the previous yr.

Mark Girling, government director of Retail Capital Markets at Colliers, stated: “The grocery store subsector’s inherent stability and scale has at all times attracted actual property traders.

“Nonetheless, previously yr the imbalance between funding alternatives and accessible capital has tilted in favour of sellers.”

Mr Girling additionally indicated that exercise has been targeted in the direction of notably robust and resilient belongings, Tesco and Sainsbury’s recognized as essentially the most traded retailers final yr.

There are anticipated to be extra offers this yr as debt-laden rivals Morrisons and Asda take into account sale-and-lease-back offers for his or her shops as a way to usher in extra cash and shore up their funds.

Mr Girling added: “Grocery store actual property continues to supply engaging risk-adjusted returns, particularly given the steadiness of long-term leases and regular client demand.”

Grocery store deal spree

There have additionally been main offers in current months, together with the £403m three way partnership deal between Grocery store Revenue REIT and Blue Owl Capital, which is aiming to develop to be value £1bn.

Quite a lot of non-grocery shops have additionally been snapped and transformed into supermarkets over the previous yr as rising populations have additionally elevated meals demand.

Final yr, Sainsbury’s agreed to purchase as much as 10 shops from collapsed DIY and backyard retailer Homebase to transform them into supermarkets in wanted out-of-town retail areas.

Matt Hobbs, head of retail lease advisory at Colliers, stated: “Grocery retail’s increasing footprint highlights each the alternatives and complexities of buying and repurposing giant retail shops.

“These newest transactions are more likely to form open market lease assessment negotiations within the coming months.”

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