Tesco is in talks to build homes on top of its London stores and car parks in a bid to squeeze more value out of its massive land holdings. The supermarket giant hopes that the bold strategy could earn up to £400m.
The discussions are with Apex Housing Group, a London-based developer that specialises in building on top of existing buildings, as was first reported in the Sunday Telegraph.
According to Apex there are 500,000 properties in London which have the potential for “airspace” development, with a cumulative worth in the billions of pounds. Units can be prefabricated and lifted by cranes on top of existing buildings.
No formal agreement has been reached with Tesco as yet, and any construction could face further hurdles in planning permission. However, the planned developments would be a welcome contribution to a London housing market with a severe lack of supply.
A Tesco spokesman said: “We are looking at our property portfolio to identify opportunities where we can release value whilst enhancing the experience for customers. These opportunities may take a number of different forms from building on car parks to the redevelopment of whole sites.”
Tesco will also spend £23m on buying back property as part of its turnaround strategy under chief executive Dave Lewis. He took over the company in 2014 after an accounting scandal was revealed in which the grocer had overstated profits by £263m.
Efforts to increase the return from Tesco’s property holdings could be lucrative. The company owns property in the UK valued at £10.5bn, according to its 2015 annual report. It also has an annual rent bill of £1.5bn.