The UK’s food retail sector has seen a significant shake-up in recent years. Challenges caused by e-commerce, changing consumer habits and the rise of challengers such as Lidl and Aldi has seen many operators reassess their property portfolios and requirements.
Meanwhile, factors such as Brexit continue to cause uncertainty and in some cases patchy financial performance. For example, J Sainsbury citing the referendum as a factor, announced an 8.2% fall in its annual profits for the year ending April 2017.
However with operators such as Morrison’s and others posting healthy results, the market is becoming more confident. This has translated into a relative level of stability in terms of property strategy which has brought food retail property firmly onto the radar.
Investors however, may need to reassess their own strategies and there are several key factors to consider to optimise and manage food retail property assets.
A selective approach
For many years, as the ‘Big 4’ looked at increasingly diversified product ranges, bigger was often seen as better in terms of occupational requirements. Competition from online platforms and discount clothing retailers has seen supermarkets reassess this strategy and operators are now getting back to their core market purpose of food retailing. This has seen a general downsizing across portfolios and/or a targeting of sub-lettings or merchandising arrangements.
At the other end of the spectrum some retailers are offloading smaller stores. For example, Co-op sold almost 300 stores
to convenience chain McColls, primarily because the stores were considered too small for the format that the Co-op are aiming at throughout its trading portfolio, which is 4,500 sq ft GIA (Gross Internal Area).