Proactive Investors - More supermarkets were bought and sold in the UK last year than ever before, with the value of the transactions three times greater than 2022 figures.
The activity was driven by debt-burdened chains seeking to generate funds by divesting stores to property investors.
In 2023, £2.49 billion worth of UK food stores changed hands, marking a threefold increase from the preceding year's £770 million and a 71% surge beyond the ten-year average of £1.4 billion, data from real estate firm Knight Frank.
Major transactions involved Asda and Morrisons, both under private equity ownership, adopting sale-and-leaseback strategies.
This financial approach was particularly favoured by companies grappling with a high cost of capital.
According to the head of a property investment fund, these deals provided an avenue to either alleviate costly debt burdens or serve as an additional means to raise finances.
Asda, owned by private equity group TDR Capital and the Issa brothers, executed a £650 million sale-and-leaseback deal last summer, which saw 25 of its supermarkets sold to American property investor Realty Income Corporation.
Realty Income also acquired a supermarket portfolio from Morrisons, owned by private equity firm Clayton, Dubilier & Rice, for £175 million.
Conversely, supermarket chains with more affordable capital options have pursued endeavours to acquire ownership of their properties, exemplified by Sainsbury's acquisition of freeholds for 21 of its stores in March for £431 million.
Josh Roberts, a chartered surveyor at Knight Frank, said: “While commercial property volumes look set to decline by around 50 percent overall in 2023, retail property investment has been resilient, buoyed by a record year for food stores.
“This is driven by a flight to safety, with supermarkets offering some of the strongest covenants available on long, inflation-linked leases and a significant increase in sale-and-leaseback transactions.”