New AGL Research shows Supermarkets continue to shine

The key findings of the research were:

1. Rental growth across the full range of supermarket stores over the last 5 years has been 5.1% pa
2. Geographically the north East has been the best performing region
3. Secondary stores coming off sub £10 rents have shown the best growth
4. Retailers are prepared to compromise their locational requirements and are taking new space with reduced car parking provision in poorer compromised locations
5. Tesco dominate two thirds of the UK post codes
6. The retailers move into non food sales has resulted in larger stores either through extensions or mezzanines
7. The move to larger stores has also been balanced against smaller infill stores and the massive drive into convenience stores with less than 3,000 sq ft sales allowing full Sunday trading
8. Both non-food and food retailers believe there is little synergy from trading alongside each other.

"The continued success of the supermarket sector has enabled both Tesco and Sainsbury’s to make disposals in recent weeks at yields below 5.5%. This seems to be one of the few sectors where there is still demand for stock and yields are holding steady," commented Matthew Bailey, Angermann, Goddard and Loyd Director.

"There is no fixed store size anymore. The retailers want to mop up any population areas where they are not represented and will take smaller stores than they would otherwise want in the hope of extending the sales floor at a later date."

Looking more closely at occupational requirements AGL asked the supermarket operators and other non food retailers if they saw advantages from trading alongside each other on retail parks.

Both food and non food retailers expressed the view that food shopping is very different from non food shopping with only limited synergies. They are considered to be different "missions" undertaken with different "mindsets". Concerns were expressed by both food and non food retailers that the other caused traffic congestion which adversely affected their trade. 

Finally concern was also expressed by the non food sector that the expanding range of goods now offered by the supermarket was directly impacting on their own sales. "This has been demonstrated over the Christmas sales period with the main Supermarket retailers all reporting good sales growth whilst traditional retail warehouse operators have had a much tougher time," added Matthew Bailey.

The dominance of Tesco is highlighted by the research. Of the 121 Major Postcode areas in the UK, Tesco Dominate in 81 of them and of the remaining 40 they are in second place in 24.

The research was conducted by Moran Research and Consultancy on behalf of Angermann, Goddard and Loyd, and featured in-depth interviews with seven major supermarkets and 30 non-food retailers.

For a full copy of the Reseach click here.