British supermarkets are building or planning 44.4 million square feet of store space, over seven million square feet more than Tesco’s shops currently cover.
The figure was generated from a study of planning applications across the UK by commercial real estate advisor CBRE.
The firm said if all applications are approved Britain’s supermarkets will be granted almost 50 per cent more trading space than they have now.
The majority of the applications are for out of town supermarkets. This appears to go against the message from government retail advisor Mary Portas that the major multiples should build in town centres to reinvigorate the high street.
However, in its report entitled Grocery Outlets In The Pipeline the CBRE said: "Aside from their local job-generating potential, an important attribute of grocers, which is increasingly coming to the fore, is their potent High Street anchoring characteristics.
"Non-food retailers and service related shop occupiers continue their retrenchment into larger trading locations, weakening shopping offers in many smaller High Streets. Grocers - because of the high levels of shopper footfall that they generate - are emerging as a potent anchoring alternative to revitalise dying pitches.
“The scramble for grocery space looks set to run and run not least because current economic conditions - combined with a dearth of jobs in more deprived areas - is forcing local authorities in the worst affected areas to be much more supportive of commercial development activity generally."
Dave McCarthy of Evolution Securities said 2012 could be disastrous for the sector.
“With total industry sales flat due to falling volumes and low inflation. With capacity additions increasing, this suggests that the sector could be facing significant negative LFL [like for like] sales and even worse LFL volume losses. This would be unprecedented in the UK," he said.
“Remember that food retailers are highly operationally geared and operate on thin margins. Even small decreases in sales can be catastrophic for business models built on positive LFL assumptions. Carrefour is down over 40 per cent this year, and so is Metro. The prospects for the sector are deteriorating.”
The report is available to read in full at the CBRE website.
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