Frequent trips to the supermarket by shoppers each week and demand for more choice is driving an increase in convenience store development, according to the latest research from CBRE.
The supermarket pipeline in Great Britain has surged by 68% since the onset of the 2007 credit crisis fuelling expectations of a knock-on boom in superstore development activity. However, the net increase in grocery store branches remains modest despite the rapid increase in pipeline floorspace – it is convenience store growth that has raced ahead.
In metropolitan areas many people are now shopping two or three times a week instead of one weekly shop. Due to planning restrictions, convenience stores have to be less than 3,000 sq ft net sales in order to open all day on a Sunday. However, frequent grocery shoppers need more choice and product lines than a convenience store can provide, yet still in a convenient location. Because of this, CBRE expects to see an increase in stores in the range 8,000-20,000 net sales sq ft where previously demand was limited to convenience stores (<3,000 sq ft sales) and superstores (30,000 sq ft gross +).
Chris Keen, Director at CBRE, commented:
“Formats are proliferating as retailers respond tactically to the tight planning regime on superstores, high vacancy levels in many neighbourhood locations and changes in consumer shopping behaviour. Considerable effort is being put in by supermarket majors to improve customer service and increase the delivery of ancillary uses.”
Sainsburys has been particularly active in this area, especially in the London Boroughs. The Superfresh concept has opened recently in Earlsfield and Hackney, both offering circa 7,000 sq ft sales. This will be pushed out further targeting areas with dense local resident or worker populations near transport hubs. Tesco has meanwhile delivered the Metro concept for several years especially in high footfall city centre areas. The format has been adapted in the last two to three years to absorb both small store acquisitions from the Co-op and larger ex-Woolworths units. Tesco has also completed the first basement only store near London Bridge. This proposal is expected to be the first of many designed to increase representation in key urban locations.
The emergence of ‘click-and collect’ is also contributing to the proliferation of grocery formats. For shopping frequency reasons, grocery networks are usually embedded much closer to local households than non-food branch networks, and therefore provide a potent platform for everyday non-food goods and services as well as for groceries. These locations also provide the most extensive host sites for ‘click-and collect’.
The amount of new space in the overall grocery pipeline at the end of the first half (H1) of 2012 increased to 4.52 million square foot. Supermarkets now account for 40% of all shops in the retail development pipeline, up from 25% four years ago, and 45% of all space under construction. Although the speculative shopping centre and retail park pipeline cumulatively declined by 13.3 million sq ft over the 2007-2011 period, the total shops pipeline – because of the grocery development upturn – has still grown by nearly 7 million sq ft.
Overall grocery store construction activity levels, regardless of notional pipeline growth, are heavily constricted by planning. However, while there are also major logistical constraints that cap the amount of new floorspace operators can deliver in any specific time period, to date Tesco’s much publicised move away from 100,000 sq ft (net) hypermarkets has not dented pipeline growth – the underlying pressure for more high productivity out-of-town grocery space remains.
Chris Keen added:
“Whatever is happening at the 100,000 sq ft (net) hypermarket end, and a current cooling in the market, we still expect completed floor space to continue in the 2m sq ft to 4 m sq ft bracket in the medium term. Grocers are continuing to expand: Tesco and Sainsbury’s are expected to deliver 1m sq ft each this year with Asda and Morrisons not far behind, and Waitrose and M&S are still actively acquiring.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.