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UK supermarket chain Asda has become the latest retailer to make a foray into house building after it said on Monday that it would develop a “town centre” in London, including 1,500 homes.
Britain’s third-largest grocer, owned by the Issa brothers and private equity firm TDR Capital, is seeking to redevelop a 10-acre site with help from UK housebuilder Barratt Developments.
The proposal, which is subject to planning approval, would create a new town centre with a large Asda store, as well as 1,500 homes including 500 affordable ones, and other retail units, in north-west London.
The move is a first for Asda and would represent one of the largest land deals of the last couple of years the supermarket claimed, although it did not disclose the size of the deal.
It will replace an existing Asda supermarket, which will remain open while the work is carried out, in the Old Oak and Park Royal area near Acton. In 2015, the area was identified as a prime location to undergo the largest regeneration project since the London 2012 Olympic Games.
Asda said it was considering other similar projects at a number of its freehold sites, in London in particular.
Ian Lawrence, head of mixed-use developments at Asda, said the venture “marks a significant milestone for the business” and allowed it to maximise the potential of its property portfolio for the first time.
This month, Asda refinanced £3.2bn of its debt following the leveraged buyout of the chain in 2020 as it struggles to compete with traditional rivals Tesco and Sainsbury’s and discounters Aldi and Lidl.
The supermarket’s plan comes shortly after the owner of John Lewis and Waitrose decided to scale back its own property ambitions, having in March scrapped targets to derive almost half of its profit from build-to-rent and financial services by 2030.
John Lewis said it was still committed to the initiatives, first unveiled under departing chair Dame Sharon White, but it blamed high interest rates and inflation for the decision to remove the targets. It has faced opposition from local residents over its plans to build its first rental homes in the capital.
Transforming faded retail sites into so-called “mixed use” developments that include housing has become a popular strategy for real estate investors. Many traditional shopping centres have had their value wiped out by the rise in ecommerce, while the need for new housing and investor appetite for residential property has increased.
Supermarket sites often lend themselves to new developments that replace low-rise retail buildings and vast car parks with taller residential blocks and street-level shops. A 2022 study by Savills found that nearly 24,000 homes could be built on supermarket sites in London.
Land Securities, one of the UK’s largest listed landlords, is in the midst of a £1bn project to overhaul the O2 shopping centre in Camden, which will include 1,800 new homes. Barratt has previously worked on two major residential projects on London supermarket sites, in Fulham and Nine Elms.
