Property crash is boon for ‘big four’ food giants

Britain’s supermarkets are using the property crash to seize sites for new stores in a land grab that could redefine the retail sector for years to come.

The move will consolidate the supermarkets’ stranglehold over the retail sector and alarm MPs, small businesses and green groups.

Tesco and Asda, the biggest retailers, are committed to opening 2.5m sq ft of new space this year, while Sainsbury’s wants to add 2.5m sq ft – 15% of its floorspace – by March 2011. Morrisons is on track to open 1m sq ft by January 2011.

But the Observer has learned that all the major supermarkets are scouring retail parks where tenants have gone out of business, and buying empty high-street shops and pubs for new stores. Sainsbury’s said recently it was raising £450m to buy distressed development sites.

Senior property executives believe local authorities might soon relax objections to new superstores as rising unemployment and lower yields from business rates become major concerns. Property companies say they are in a dilemma over whether to allow supermarkets to buy or lease land on retail parks for fear of antagonising existing tenants.

Property insiders say Tesco, in particular, is using intermediaries to buy boarded-up pubs that already have planning consents before passing them on to the supermarket giant. The big four supermarkets account for 75% of the UK’s £120bn grocery spend.

“There seems to be a renewed space race,” said one leading retail property executive. “There’s a lot of testing of different small- and medium-sized formats. There’s an increased investment online and, in some cases, on retail parks.”

Labour MP Jim Dowd, whose parliamentary small shops group’s report led to a Competition Commission investigation of supermarkets two years ago, said: “This is a matter of concern because it strengthens the position of supermarkets, making it harder for medium-sized stores to enter the market. And it is a matter of concern that local authorities, when confronted with derelict sites in these straitened times, are more likely to grant consent which, normally, would have faced more scrutiny.”

Gideon Amos, chief executive of the Town & Country Planning Association, said: “We must be wary of allowing the downturn to be used as an excuse to abandon the urgent priorities of sustainability – climate-friendly development, and good quality planning and design.”