Demand for supermarket property among investors has risen rapidly, and investment in the latest scheme – a Morrisons in Birmingham – is at a record level for the sector.
Chase Midland Estates is developing the 105,000 sq ft store, plus eight shops, and Prupim – the property arm of M&G Group – has bought the development for one of its annuity funds. The £50m paid reflects an investment yield of below 4.5 per cent – a yield (return to the investor) last seen in the property boom pre-2008. Prupim is funding the development and will own the site on completion. Bradford-based Morrisons has signed up for a 35-year lease on the Coventry Road location in Sheldon, Birmingham, with a rent linked to the retail price index.
It is unusual for an annuity fund to purchase a development, due to the risk involved with construction, but competition for the scheme was high among a range of funds and investors.
Britain's big four supermarkets will open around 19 million square feet of new space in the next three years, with Tesco and Sainsbury leading the pack.