Australia’s supermarket giants already have a lock on the groceries we buy every day, so why are they now getting into the real estate game?
Woolworths has been building apartments on top of some of its stores across Sydney, Melbourne and Brisbane; while Coles has begun building ‘mixed-use’ developments for sale across Sydney.
The two are trying (and succeeding) in creating vibrant residential areas around their stores, which will in turn attract more customers to the area.
Once this has been achieved, they will most likely sell the buildings to real estate groups for a large profit.
Morningstar equity analyst Alex Prineas told realcommercial.com.au that Woolworths and other retail businesses have been building their own supermarkets and other commercial buildings for years, but were typically more interested in selling the properties rather than owning them long-term.
“Property development isn’t a major strategy for Woolworths,” he says.
“Typically they will develop a new supermarket and they will own it for that period, but once it’s an operating site, they will often sell it on to a real estate investment trust (REIT) or other landlord and become a tenant with a long lease on the retail space.”
A spokesperson for Coles says the operate their property portfolio in a similar way and focus on property developments where there were good retail and supermarket outcomes.
“We do some development partnerships and have delivered within mixed-use spaces, which is generally inner metropolitan areas and includes apartments, offices, medical centres,” the spokesperson says.
Could this be a good answer to the housing crisis? Or just a case of the giants getting bigger?
.
