| LONDON, April 17
LONDON, April 17 Britain's sluggish economy and
the growth of online shopping has killed the space race among
British supermarkets, leaving Tesco sitting on over 100
unwanted sites it could take a long time to sell, property
As part of its fourth-quarter results, the country's largest
retailer announced a 804 million-pound ($1.2 billion) writedown
on its UK property on Wednesday, hit by the double impact of
falling prices since the financial crisis and the fact sites
automatically become less valuable if they are not destined to
become food stores.
More than 100 sites will not be developed, it said.
"Tesco has been exceptionally aggressive over the last 20
years buying land, and there had to come a point when they said
'no more'," said Tom Edson, head of food stores at property
consultant Jones Lang LaSalle.
It has more unwanted property on its books than rivals
Sainsbury's, Asda and Morrisons, though none of
them discloses exact figures, he said. The so-called big four
supermarkets own about 80 to 85 percent of their larger
properties, Edson said.
The growth of online shopping and weak consumer spending
have curbed the need for large stores, as supermarkets bet more
heavily on online shopping and smaller local convenience stores.
Retailers received more bad news on Wednesday when Britain's
Office for National Statistics said unemployment rose in
February and wages growth was the slowest since records began in
Tesco will take its time to offload the sites as it won't
want to sell too cheaply, said Stuart Lunn, a senior director at
property consultant DTZ.
"The freehold value of foodstores is between 400 and 600
pounds per square foot compared to 250 pounds to 400 for a
typical B&Q (DIY chain) store," he said. "Disposals will be very
slow, because Tesco's challenge is to achieve value."
It could switch a minority of sites to uses such as gyms,
doctors surgeries, non-food retailing and restaurants including
its recently acquired Giraffe chain, he said.
The most lucrative way out would be to sell for housing,
said Edson, though not all sites would be suitable.
Locations and prices paid for real estate are a fiercely
guarded secret among supermarkets, which often buy through
anonymous shell companies to avoid local protests against large
retailers or sellers ramping up their prices.
One million pounds per acre was typical for the best plots
of land prior to the crash, said Edson, who said the figure
could now be as low as half that, depending on the area.
"If you had eight acres in London everyone would still go
mad for it."