Demand for supermarket property assets in the UK is expected to continue as investors look for a source of stable rental income.
According to the Colliers UK Grocery Real Estate Review, £1.83bn of supermarket assets were traded last year as investors targeted the sector for returns. The research also found that in last December alone, the sector saw grocery sales volumes hit £11.7bn – the highest ever monthly level.
“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,” said Tom Edson, head of retail capital markets at Colliers.
“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. Edson said that the ‘Big Four’ operators including Tesco, Sainsbury’s, ASDA and Morrison’s have benefited over the last year as a result of capitalising on their online shopping platforms, while firm’s such as Aldi and Lidl fared less well as a result of having a lack of online presence.
Tom Edson added: “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.”