So, maybe I was wrong?
I’ve written a few blog posts on how the COVID Lockdown is affecting Commercial Property in general and bricks, and mortar retailers in particular. It’s fair to say, I’ve been a bit down on the sector.
However, a week or so ago the Issa brothers, backed by TDR Capital, bought Asda from Wal Mart for £6.8b. What’s more, they have pledged to invest £1b in Asda over the next 3 years. The Issa brothers made their billions through EG Group, which owns almost 6000 petrol stations across 10 countries.
That must bring a smile to the face of commercial landlords. If somebody is prepared to make that sort of investment into the retail sector, and into a business that has such a massive retail “footprint”, maybe it’s not all “doom and gloom”.
So, “shrug” what do I know….! Looks like some far cleverer businessmen than me see money in traditional retail, which should, in turn mean rents will continue to flow, and values hold up.
But, here’s a thought …. what if their plan isn’t traditional retail?
Apparently the £1b investment is earmarked for “convenience and online operations”. Asda’s online presence has doubled since the start of lockdown. So that bit makes sense, but the interesting bit is the “convenience operations”. I suspect this means that, very shortly, Asda will be opening small footprint convenience stores on petrol station forecourts. And I can think of 6000 potential sites!
But what about the huge Asda mega stores. There’s one not far from where I live, and it’s cavernous. But again, a move away from “traditional retail” may be on the cards.
First, there is a lot of space that could be used for fulfilment of online orders, and “click and collect” fulfilment of e.g. clothes.
In addition, recently Asda’s chief strategy officer, Preyash Thakrar said
“Our partnerships strategy is focused on making our busy customers’ lives easier. That means offering convenience when they visit our stores by bringing in complementary brands to help them complete more shopping missions in one location, and convenience that makes our great value products more accessible in local communities.”
So, rather than filling out their mega stores with Asda products, there will be a selection of alternative retailers, working in a partnership with Asda, essentially subletting space in their stores. This will benefit from EG Groups experience of setting up franchises in their petrol forecourts.
David Calder, Managing Director