Supermarkets sitting on massive land banks

Tesco boss faces profits pressure
Tesco boss faces profits pressure

Supermarkets have again been accused of hoarding building land, as a new analysis reveals that they are building on just six percent of the land they control.

The report, from property agent CBRE, found that 46.61 million square feet of space were earmarked for new supermarket development - but that only 2.8 million square feet are actually under construction.

"It is too early to say whether we are looking at a hiatus or the onset of an actual long-run decline in UK grocery store development activity," Chris Keen, director of supermarket leasing at CBRE, tells the Daily Telegraph. "A sea-change in grocery markets is, however, certainly occurring."

Part of the problem has been caused by the closure over the past few years of Somerfield, Kwik Save, Safeway and Netto. The 'big four' chains snapped up sites from these, as well as the Co-op - and then carried on buying land to protect their market share.

Now, though, the bulk of the development land owned by supermarkets is lying idle. According to the new figures, building work on stores has fallen by 20% compared with last year.

Sainsbury's recently warned that it was cancelling plans for 40 new sites, and made a £341 million writedown on existing stores which were making little or no profit.

Tesco is also expected to announce a large write-off on its property as early as this week - possibly as much as £1 billion. Last year, an analysis of Land Registry records by the Guardian found that the company was sitting on enough unused land to build 15,000 houses.

The supermarkets point out that much of the land they own is unsuitable for housing. Tesco, though, responded to criticism last year by announcing plans for 4,000 new homes, mostly in the south of England. Some will be built by the company itself, while some sites will be sold to developers.

Meanwihile, Sainsbury's is partnering with builder Barratt to build 700 homes and a new tube station in Battersea.

A year ago, Ed Miliband pledged that a Labour government would legislate to stop property developers stockpiling land for profit. The aim is to free up land to more than double the number of homes being built each year in England. This legislation, though, wouldn't apply to supermarkets - and with new home building lagging way behind demand, many people believe that it should.

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What Can Tesco Do Now?
What Can Tesco Do Now?