UK Edition
Tesco speeds up plans to build homes on stores and car parks
Tesco has kicked off radical plans to build hundreds of homes on some of its largest supermarket sites.
Britain’s biggest retailer is understood to be holding a beauty parade of property developers who are vying to be involved in the scheme, which could help relieve the country’s housing shortage.
According to sources, the chain is starting off with two portfolios of ten sites, which could see hundreds of new homes built on its car parks and some on top of flat-roofed Tesco stores.
It is thought that preferred developers for the first tranche of sites could be picked by the end of the year.
The grocer is looking to sweat its vast property assets by selling off “air rights” – a new concept which involves selling the rights to build over retained land on a long leasehold basis.
Typically, flats are built on top of existing buildings. Recent developments have involved many being constructed off-site, then crane-lifted into place.
The Sunday Telegraph previously revealed that the supermarket is in talks with developer Apex Airspace – a specialist in air rights. But it is thought the supermarket’s first redevelopment efforts will concern under used car parking space considered to be less complex and time consuming.
Tesco is looking for ways to make the most out of its property empire following an intense price war with discount chains, which has made its stores less profitable.
The rise of online shopping has also reduced footfall. However, Tesco’s recovery from the depths of its 2014 accounting scandal was strengthened last week when industry figures revealed it had grown market share for the third consecutive month.
Analysts have suggested the supermarket could raise up to £1.5bn overhauling its property and a further £1bn could be raised from selling off land. Meanwhile analysts at Bernstein have said that Tesco could generate around £500m from subletting space in its biggest stores to retailers like Dorothy Perkins and Timpsons.
Alan Stewart, Tesco’s financial chief, has said that the housing development plan will not involve the retailer putting in more cash.
Sainsbury’s has recently opened the £450m Nine Elms development near Vauxhall which includes an 80,000 square-foot supermarket and 737 new homes.
The supermarket’s latest accounts reveal the development boosted property profits by £95m. It has identified 10 London sites where it could build homes.
Meanwhile, Morrisons plans to build 700 homes as part of a redevelopment of its Camden store in north London.
A spokesman for Tesco said: “We are talking to a number of parties exploring options for sites in urban locations.”