The supermarket sector has rebooted following a turbulent 2014.
Property investors bought £1.3bn of supermarket property assets last year, providing an average return of 7%, according to the latest MSCI/Colliers International UK Supermarket Investment Report.
It states that in the face of operator profit warnings, curtailed expansion programmes and fierce competition from discount retailers, the supermarket property investment sector has developed primary and secondary asset markets which continue to provide opportunities for investors.
The research analyses the performance of £6.8bn of supermarket assets and shows that in 2014 there was average rental growth of 0.3%.
Although the ‘Big Four’ operators (Tesco, Sainsbury’s, Morrisons and Asda) have largely curtailed their store expansion programmes, there is still around 3.9m sq ft of new supermarket space in the development pipeline.
Discount retailer Aldi has the largest development pipeline of 2015 with more than 1m sq ft.
Colliers International head of UK retail investment James Watson said: “The sector has, in effect, rebooted itself without losing its overall momentum. Operator difficulties are being offset by an improving economic situation and a more constrained supply of new supermarket assets.”
