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News & opinion

6 FEB 2019

The merits of supermarket-led housing developments

Is supermarket-led housing development a good thing, or just a way for retailers to obtain planning permission for new sites that would otherwise not be approved? Four leading experts share their views.

There’s no silver bullet

Supermarket-led housing developments certainly look very planning friendly. In high-value residential areas, particularly in London, some supermarkets are now building significant numbers of homes on top of their stores.

But these are time-consuming projects. And, as well as the time involved in gaining planning permission, supermarkets have to carefully consider whether such schemes will help or hinder their trading performance. I would guess that far more sites have been assessed for their viability than have been brought forward.

It’s certainly much easier for a store to obtain planning permission if they’re putting residences above the supermarket – planners generally favour mixed use and there’s a demand for housing.

As far as companies such as Lidl and Aldi are concerned, the mixed-use proposal helps them to “win” sites from a financial point of view, but I think if you asked them behind closed doors whether they’d prefer to simply build big stores, they’d probably say yes. Right now, it’s a means to an end for them.

The self-sustaining relationship sounds ideal – tens or hundreds of readily available customers just above the store, ready to pop down at any time of day for their grocery essentials, keeping the tills ringing. However, just because there are people living above the store, doesn’t necessarily mean they’re the ones keeping it in profit – the development still needs to select the right catchment area to be visited by a lot of people.

  • Richard Petyt MRICS is a partner at Knight Frank.

Such schemes are more common in continental Europe. I’ve even heard of a five-a-side football pitch above a supermarket in Holland.

Simon Milliken MRICS
Brasier Freeth

Supermarkets can help councils

From a planning point of view, supermarket-led housing should be thoroughly encouraged as a means to increasing mixed-use developments in towns and cities struggling to meet housing requirements – as long as the schemes meet all relevant design and development control criteria.

Such schemes are more common in continental Europe, which is ahead of the UK in terms of utilising space above supermarkets. I’ve even heard of a five-a-side football pitch above a supermarket in Holland.

In principle, building homes above supermarkets is a great idea, but in terms of providing a satisfactory living environment, issues with noise and disturbance quickly arise. With deliveries and night-time shopping, supermarkets often operate 24 hours a day, and there may also be concerns over security and a lack of parking.

But I’m sure many people – the young, especially – would love to live somewhere that allows them to walk downstairs for their groceries.

I don’t think we should worry about supermarkets fancying themselves as developers – if the schemes are acceptable, local authorities aren’t particularly fussed about who is providing housing. It is now incredibly difficult for UK councils to meet their five-year local housing requirements, and there’s going to be a huge ratcheting up in the need for them to increase their housing land supply figures.

Thinking long term, many town centres are already increasingly converting former shop units or offices into housing, so why shouldn’t supermarkets be a part of the housing mix, too?  

  • Simon Milliken MRICS is a consultant for Brasier Freeth.
Man in supermarket
Many people – the young, especially – like living where they can simply walk downstairs for their groceries

Consider air quality and noise

Ten years ago, it was highly unlikely that big supermarkets would even consider getting involved in housing developments. But two seismic shifts have taken place in the past decade: the growth of online shopping, and home deliveries for groceries.

Big retailers no longer need to build stores in the same numbers and on the same scale. Whether it’s the supermarkets themselves leading the project, or if they get involved as occupiers, it seems appropriate that they should venture into residential development as a way of diversifying their portfolios. But it has to be financially viable.

Providing that surrounding issues such as noise levels, air quality, parking, accessibility, servicing and refuse collection can all be surmounted, then mixed-use, supermarket-led concepts in accessible locations fall firmly in line with current planning policy, including that of town centres and the current National Planning Policy Framework.

In short, if the new-found marriage between supermarkets and housebuilders works for everyone concerned, then it will be fully supported by the relevant authorities.

Big supermarkets have got the financial clout to play a wider role in providing housing if they wish to, but their growth won’t just hinge on planning issues – above-supermarket residential developments will only flourish if the developers know they can sell them, and this all depends on whether the banks are lending the money for mortgages.

  • Simon Birnbaum is director at SMB Town Planning, and former strategic town planning manager for Tesco.

Supermarkets, developers and housebuilders are really getting their heads around how these uses can complement each other.

Tim Price

Integration is key

This is a prime example of how the UK’s retail sector is constantly evolving. But I wouldn’t say that supermarkets are simply jumping on the housing bandwagon as an easy way to obtain permission for stores.

In fact, what we find is that many developers have to include a retail element to get planning permission for their housing developments, due to a requirement to provide local conveniences, so the relationship is mutually beneficial for both sides.

This type of development started around 10 years ago. Early on, there was a lack of understanding about the operational impact of having large-format retailing alongside residential. But today, the supermarkets, developers and housebuilders are really getting their heads around how these uses can complement each other.

For example, we might now see the service yard for the supermarket enclosed beneath a podium, when previously it would have been open and a bit of an eyesore. Gardens or community spaces may also be integrated into the scheme, hiding the service operations below. 

These schemes can only work in carefully selected locations. But given that we’re not achieving anywhere near the housing numbers needed, it can only be a good thing.

It would be easier for supermarkets to get standalone permission for food stores, rather than having to bolt on residences and other complicated community facilities. Instead, they’re considering new angles on mixed-use development and land optimisation – and maximising their results accordingly.

  • Tim Price is a director in retail planning at Savills in London.

This article was originally published in The Public Space Issue of Modus magazine (February 2019).