Data suggests supermarkets are not building in Scotland until vote brings clarity

For the time being we still live in a world where corporations cannot vote, but if the supermarkets could cast a ballot in next month’s Scottish independence referendum it’s a fair bet they might line-up alongside the ‘no’ camp.

Tesco and Asda have already warned of the potential for rising food prices if Scotland votes ‘yes’, but latest figures on grocery property trends suggests the supermarkets are also scaling back construction of new stores north of the border amid the political uncertainty.

Data from property consultants CBRE has found that Scotland has the largest amount of new floorspace in the pipeline in the whole of the Great Britain, but that grocery retailers are currently constructing only a tiny proportion of this space.

By the end of March 2014, supermarkets had 6.55m square feet of Scottish floorspace in the pipeline – stores that have either been proposed or have already received planning approval.

This represents 13.75% of total pipeline floorspace in the UK (excluding Northern Ireland), topping the South East region which has 5.6m sq ft proposed (11.8% of the GB total).

However, while the South East is responsible for 13.8% of pipeline under construction (behind the West Midlands on 17.8% and Yorkshire and Humber on 14.2%), Scotland represents just 6% of total supermarket construction.

As a proportion, just 2.3% of the total Scottish pipeline is currently being constructed – well below the total national proportion of 5.2% and the lowest proportion of all eleven regions listed by CBRE (by contrast 8.5% of London’s pipeline is under construction and 10.2% in the West Midlands).

There are, of course, different ways to read the data. The strong Scottish overall pipeline could be seen to be a sign of continued supermarket investment in the country or it could be that retailers are finding it harder to secure building permission in Scotland to enable construction to begin.

But in an era of sharply when land already approved for building is increasing being held undeveloped by supermarkets, the lack of activity on this large Scottish pipeline suggests a mood of caution is prevailing.

The data also backs up previous figures cited by The Grocer (from property analysts Glenigan), which found that UK store planning approvals were up 69% in 2013 over 2011, but up only 53% in Scotland over the same period.

Late last year Sainsbury’s and Asda suggested that the expansion of their Scottish footprints would slow due to uncertainty over the tax policies of a newly independent Scotland.

All of this indicates that supermarkets are keeping their powder dry in Scotland until there is some clarity about the nation’s future – not least about Scotland’s position in relation to the EU and the pound.

That mood of caution, of course, is not attached to Scotland alone. The unprecedented pressures the big five supermarkets are being subjected to has caused the amount of newly proposed floorspace (i.e. applications without consent) to fall to the lowest level since late 2008. At the same time, the floorspace with planning consent is at an all-time high (of 29.9m sq ft), but construction rates are at their lowest since March 2011.

Christopher Keen, director, CBRE retail lease consultancy, concluded: “The grocers’ preference for smaller store formats is showing through now with the amount of ‘proposed’ floorspace at its lowest level since the ‘race for space’ began at the onset of the credit crisis.

“The reason for the shift to smaller stores is in part a response to changing consumer shopping patterns but also because they are lower cap ex to deliver, have less impact on trade of existing stores and are easier to secure planning permission.”