Tesco ramps up store development by 40%

Supermarket giant Tesco is looking to expand its store development programme by 40% on last year, and bring in new contractors to do the work.

The retailer said on Tuesday it would start a £1.6bn development programme this year, which it is understood will mean restarting a number of schemes on hold, particularly major mixed-use developments.

Tesco plans to build a total of 2.4 million ft2 this year, a rise of 41% on the below average 1.7 million ft2 in 2009.

One source close to the retailer’s supply chain said: “We’ve been told they definitely want a 25% increase [above the 2 million ft2 annual average] in the floorspace delivered this year from previous years. And they’re talking about bringing in other contractors.”

However, the source warned that because Tesco was continuing to drive down prices, such an increase in store space would not amount to an equivalent raise in revenue for its suppliers.

The news comes amid a reshuffle of Tesco’s contractor framework, in which Kier and Taylor Woodrow (Vinci) have taken a lesser role. It is thought Essex-based McLaren is one of several firms in talks to join the framework, which already includes Barr, RG Carter and Bowmer & Kirkland.

We have developed a good pipeline of new space opportunities

Tesco

Six mixed-use schemes are now being restarted, as predicted by Building in December. These include Love Lane in Woolwich, south-east London – now expected to start in May Queen’s Square in West Bromwich in the West Midlands, and the Streatham Ice Rink scheme, south London.

The company has spent the last year reworking the schemes so they can be phased over a longer period to take advantage of market changes. It is also thought to have reduced the residential element of a number of schemes. Tesco cut part of its mixed-use development team at the start of 2009 as the recession bit into its expansion plans, causing it to review its commitment to city centre regeneration schemes.

In recent weeks it has been presenting revised development plans to architects.

Tesco said: “Over a number of years we have developed a good pipeline of space opportunities. As a result we can unwind some of the work in progress we have built up and will be stepping up the rate of expansion in 2010/11.”

The statement came as Tesco reported a 10% rise in pre-tax profit to £3.2bn.

Other supermarkets, including Morrisons and Sainsbury’s, have announced store expansion plans in recent weeks. It is also thought that Waitrose has been in talks about expanding its programme.