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Investment into supermarkets surpassed 2019 levels and long term average in 2020 to reach £1.83 billion

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Demand for UK supermarket property assets has boomed in the face of the soaring sales volumes experienced by UK grocery operators during the pandemic. The trend has been further driven by the challenges facing other commercial property asset types and investors looking for a source of stable rental income.


The latest Colliers UK Grocery Real Estate Review reports that £1.83bn of supermarket assets were traded last year as investors targeted the sector for returns underpinned by grocery sector performance. Last December, the sector saw grocery sales volumes hit £11.7bn – the highest ever monthly level. 

 

Tom Edson, Head of Retail Capital Markets at Colliers, comments: “The pandemic has impacted all areas of commercial property investment, but grocery-backed assets have proved most resilient as they have been underpinned by this unprecedented focus of consumer spending.

“The long-term annual average trading volume for grocery-backed property assets has been around £1.4bn but we are now seeing investor demand that far outstrips supply.”

The home delivery costs entailed by online grocery shopping has meant that operators have previously struggled to make profits out of this aspect of their business, but the super normal level of sales in 2020 has given them the financial resources to upgrade their infrastructure. This may become increasingly imperative as it is expected that as many as a third of shoppers who switched to online during the pandemic will not return to grocery shopping ‘in person’.

Tom Edson continues: “The Big Four operators – Tesco, Sainsbury’s, ASDA and Morrison’s – have benefitted most in the past year as they have had the breadth of product lines and online shopping platforms to meet demand. The discount operators – primarily Aldi and Lidl – fared less well because of their lack of online presence, but the entire sector has seen increased trading volumes.

“The ‘get-it-while-you-can’ atmosphere engendered by successive lockdowns has fuelled the move online and has seen a return to the weekly ‘Big Shop’. Once the mainstay of supermarket trading, it had faded in recent years as shoppers became more impulsive in their habits and relied increasingly on convenience stores.”

With property investors targeting the sector in growing numbers and operators buying back their stores to mitigate the ongoing effect of rental liabilities, the availability for grocery-backed assets looks like it will become constrained.

Tom Edson adds: “The attraction of buying a property asset which is backed by a solid corporate covenant that has continued to pay its rent throughout the pandemic is considerable. 

“However, this enthusiasm should be balanced by awareness of macro-economic factors such as the increased levels of unemployment which surely must occur this year and also the effect of the final Brexit deal which may bring higher food prices and have a dampening effect on grocery spending.”

Download our UK Grocery Review here


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Tom Edson

Head of Retail Capital Markets

London - West End

Tom is currently Head of Retail Capital Markets and co-head of the UK Retail Group at Colliers International.  

 

During Tom's 20 year career he has specialised in the Retail sector, ranging from High Street, Shopping Centre, Retail Parks and Supermarkets.   He has helped some of the UK largest  Investment companies formulate strategy on the acquisition or disposal of commercial property. 

 

In addition Tom is considered one of the UK's only Supermarket specialists giving a broad range advice to both occupiers, developers and investors.

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Greg Styles

Head of Retail Development and Advisory

Leeds

Greg is a retail property and development specialist with nearly 30 years’ experience, who advises clients across the UK on all aspects of retail agency, development and investment. He provides advice on food stores, shopping centres, out of town and all other forms of retail and mixed use development.  His expertise includes master planning, scheme design, development appraisals, compulsory purchase, leasing, development agreements and the sale and funding of projects.  Greg is a particular expert in food store development. He is retained by Sainsbury's to advise them on their supermarket properties across the north of England and also advises ALDI's Corporate Property team.  Greg has a strong track record in advising both private and public sector clients on the development of new shopping centres, retail parks and mixed use developments.

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Matthew Hobbs

Head of Retail - Lease Advisory

London - West End

Having worked in the Lease Advisory side for over 30 years, Matthew is a specialist in high value retail / leisure rent reviews, lease renewals and lease negotiations.

This includes luxury shops and bars / restaurants in Central London along with other large shops (particularly supermarkets / department stores) and flagship stores for both landlords and tenants in London and throughout the UK.

His team of seven full time professional surveyors and four consultants deal with retail / restaurant rent reviews, lease renewals and regears for landlords and occupiers in all of the major towns and cities in the UK. He also works closely with the agency and investment teams in asset management initiatives, lease restructuring and investment acquisitions and sales.

He is on the RICS panel of independent experts and is regularly called upon to act as third party on high value rent reviews in Central London and throughout the country.

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Rebecca Allen

PR Manager

London - West End

I have been working in commercial property communications for over seven years having previously worked at CBRE and most recently Savills.

In my role at Colliers I am responsible for the PR of national capital markets, London agency and capital markets teams and investment property management.

My role includes:

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