Source: Lidl

Lidl owns the freehold to about 80% of its UK stores

Lidl is looking for investors to build a portfolio of supermarkets which it will then lease back from them, in the first time it has sought such funding in the UK. 

The discounter wants to boost its store opening programme with £91.16m in funding to build 12 supermarkets across the country.

In a funding pitch seen by The Grocer, the retailer is offering “a unique opportunity to acquire the freehold and fund the construction of 12 supermarkets let to Lidl GB”.

Lidl cut funding to its construction programme at the start of 2023, scaling back its new store pipeline for the year from the usual 50 to 25, while saying it wanted to focus investment on growing warehouse capacity instead.

Debt held by Lidl’s parent the Schwarz Group is thought to have prompted the slowdown in investment in UK expansion amid soaring interest rates.

Outside investment to build new supermarkets could give Lidl a way to get its estate expansion programme back on course and help it towards reaching its target of having 1,100 UK stores by the end of 2025

It is the first time Lidl GB has sought such investment, preferring to own its stores – only about 20% of its roughly 960 UK stores are leasehold.

Lidl’s funding pitch specifies each store will be on a 25-year lease with a tenant break option at year 15. It says the lease will be subject to five yearly rent reviews based on open market values.

The annual rent per store will range from £282,000 to £469,000, according to the document, while the total payable on the portfolio will come to £4.1m.

The average gross internal area of the stores is to be 22,173 sq ft, with the rent per sq ft ranging from £12.83 to £19.18.

The document also specifies the 12 locations across the UK: Alexandria, Birmingham, Bovey Tracey, Bristol, Crediton, Downham Market, Hull, Manchester, Northampton, Reading, Redcar and Saffron Walden.

“We have long taken a flexible approach to delivering new sites with the core aim of giving all households access to a Lidl store,” said a Lidl spokeswoman.

Font Real Estate partner Tom Edson said investors had been “knocking on Lidl and Aldi’s door for six or seven years to propose something like this” but until now neither had shown interest.

However, he said the terms Lidl was proposing, with an initial net yield of 4.25%, were highly ambitious and the discounter would likely have to negotiate for a deal.

“Investors also often get discount for forward funding, because if I buy a built supermarket now, I get rent immediately, whereas for this deal you’re investing in a store which hasn’t been built yet,” he said.

“But the opportunity is extremely rare – nothing like this has been offered by Lidl in the UK before.”

Edson added: “I think they will definitely have interest. Lidl has said what they want and a property investor will now say ‘OK, we’ll buy them but this is what we want’.

“If they had put this portfolio on the market two to three years ago, they would have got that pricing. But all commercial property is cheaper than it was two years ago.”

The Lidl funding pitch sets out how it is the UK’s fastest-growing supermarket, with sales of £9.3bn in its 2023 financial year.


Source: Lidl

Lidl’s funding pitch includes the proposed rent on each site

Lidl funding pitch

Source: Lidl

The pitch sets out the price, rent and yield on each store