Developing urban, small-scale, mixed use schemes across London and the south-east is proving a source of additional income for leading supermarkets, who are renting and selling residential units above stores to maximise a site’s profitability.
Finding themselves under increasing pressure with smaller profits and slow trading, the major supermarkets are looking to residential property as a way to acquire new retail sites.
The German-owned discount supermarket chain Lidl is now intending to head a new development of around 3,000 new homes including a primary school in Richmond, scheduled for completion in 2019.
Lidl has been involved in housing development for the past 10 years, but to date has only been responsible for constructing 335 new homes. It is now viewing mixed-use development as a tactical move to gain planning permission for a cluster of new outlets in and around London.
Planning permission driving retailers to expand mixed-use offering
Property experts believe that chains including Lidl are fuelled by the difficulties in gaining planning permission for new stores in London at a time when existing retailers are finding the market place tough. Councils are more likely to consider planning applications that bring tangible improvements to their existing infrastructure and benefit the local community. Therefore, committing to building new schools, creating affordable housing and student accommodation and improving amenities can be a powerful influencer at local council level.
Fellow supermarket chains Sainsbury’s, Tesco and Morrisons have both been behind schemes in London. Sainsbury’s partnered with Barratt Homes to create 700 homes in Nine Elms, near Vauxhall, south-west London. Recently, they acquired a site for a £200m project comprising 683 new homes in Redbridge, east London. In Woolwich and Streatham in south London, Tesco built hundreds of homes above its stores. In 2017, Morrisons was successful in applying for planning to build around 600 homes around the redevelopment of its store in Camden, north London.
Living above the shop allows for profitable site expansion
Tom Edson, supermarket expert at the property consultancy Colliers, said: “Lidl and Aldi both need to push aggressively into the south-east, especially London. The only way they can afford to pay a premium for development sites is by also committing to residential development. Having people above the shop is not a bad thing; it means you have got a ready customer base.”
Lidl will build some new homes alone and also partner with developers in the construction of wider projects, intending to create affordable homes that fit in with its economic branding.
Lidl’s managing director, Christian Härtnagel, said: “Lidl has developments linked to 476 homes in the pipeline, about half of which will be linked to a store in Alperton, north-west London. A store with six flats above it is about to open in Dartford, Kent and more are planned in Epsom, Surrey, by 2020.
“We’re proud that our stores are increasingly helping to pave the way for mixed-use developments, which in turn are supporting important initiatives.”
“It continues to mean a great deal to us that we are able to support many of the communities that we’re a part of by providing added value above and beyond affordable food.”