Retailers snap up former pub and petrol station spaces

When it comes to store acquisitions, there is one golden rule: location is key. This is particularly true for the convenience retail sector, where ease of access is so crucial.

Nationwide, pubs and petrol stations are falling victim to the economic downturn and shutting up shop. Five pubs go out of business in the UK every day. The ability of the big supermarkets to undercut them with cheap booze and the latest bombshell – the smoking ban – have squeezed traditional landlords and big-chain operators alike.

Paramount Investments is a London-based developer that specialises in buying and reselling former pubs for a mixture of end uses, and much of this space is snapped up by retailers. “The pub trade has changed drastically,” says Paramount managing director Mark Greig. “Taxes on beer and other increases have put big pressure on pub operators. Around 20,000 pubs are expected to be sold out of the trade in the next couple of years.”

And for similar reasons the petrol station sector has been hit just as hard. The fact that supermarkets are also taking on the big forecourt players has adversely affected the industry and the final killer blow has come in the form of rocketing fuel costs.

What is disaster for some, however, is opportunity for others. In July this year, Retail Week revealed that retailers were lining up to take the reconfigured space in the former Hog in the Pound pub on fashionable South Molton Street in London’s West End. The fact that names such as Nike and Armani Exchange are considering the site – expected to be completed and let by summer next year – proves that developer Kenmore is creating a prime pitch.

While the majority of retailers’ hatches are truly battened down, there are those with their minds on expansion. If growth is on the cards, many businesses aim for a speedy and simple acquisition process. So what does empty pub and forecourt space have to offer retailers? And could this be a growing trend?

Majestic Wine, Somerfield, Aldi and Tesco are among those that are taking advantage of this opportunity wherever possible. Somerfield acquisitions manager Tom Trenchard says: “We’re incredibly active in terms of acquisitions.” For Somerfield, the strife in the petrol station sector has opened the door for it to take over spaces that are perfectly suited to the convenience format it is expanding into.

Planning consultancy Rapleys partner Rachel Saint, who has acted for Somerfield in its forecourt acquisitions, says that it is a shrewd move that many food retailers are starting to increasingly adopt as a strategy.

“It’s all about a focus on convenience and the growth in that sector. The perfect sites are ones on a main-road position with easy accessibility and parking, whether they sell petrol or not.

“Food retailers have researched their market carefully and they are aware that the convenience sector is burgeoning and it’s going to keep growing – and they want to be a part of it. Tesco, Sainsbury’s and Somerfield are all in the market. They’ve seen the potential in these locations and they are actively pursuing them.”

No planning involved

One of the most significant advantages of operating out of such sites is that the time and cost of adapting them for retail use is significantly reduced.

Majestic Wine property director Stuart Williams says: “One of the benefits is that you don’t have to go through a change of use application. The strategic part is that there’s no planning involved.” He adds: “You haven’t got the redevelopment issues in former petrol stations and pubs that you have in other places.”

Greig also points out that many of the sites coming onto the market are being taken by retailers not just for the location and quality but because there are great deals to be done. “Because there’s an abundance of all types of property in the UK there is great value to be found,” he explains.

The buildings that pubs and petrol stations vacate can often provide the perfect space for the right retailer. The attraction of those units for stores is that they are already in strong locations either on the high street or out of town.

For many retailers the location is far more important than the type of building. “Most active retailers won’t just look at existing shop property,” explains planning consultancy Nathaniel Lichfield and Partners director Steven Butterworth. “Location is the most important thing. Whether it’s a bank or a shop or a petrol station, they will consider the potential of being in that location.”

Somerfield, which bought 115 forecourts from Texaco in 2005, has benefited from moving into former petrol stations because of the superb locations it now has under its belt. It has embarked on a year-long programme of demolishing and rebuilding some 60 dual-brand Somerfield and Texaco forecourts and replaced the small stores on site with more substantial convenience outlets.

With the majority of the new stores Somerfield is acquiring, the retailer is only setting up convenience stores – petrol is not part of the equation. And as it aggressively expands its convenience portfolio, Somerfield is placing former petrol stations high up on its hit list. Trenchard says: “Petrol stations were put there for a reason. They’re on a busy road and they’ve got good access and egress. Taking the pumps out gives more parking space.”

And as Trenchard explains, the disappearance of smaller petrol stations presents Somerfield with the perfect chance to serve a strong catchment. “The type of petrol station that’s closing down is more likely to be in a residential area, so that gives us access to the residential catchment,” he says. “If a petrol station has failed once, the chances are it may not work as a petrol station again. It’s much more likely that we would look to develop a convenience store.”

Aldi is another retailer that has grasped the benefit of taking on such property. Within weeks, work will begin on its latest former petrol station development, in Norwich; the plans were given the go-ahead last December. Aldi has been on the expansion trail since it arrived in the UK in 1990, but over the past year has thrived as consumers who are feeling the pinch flock to value food retailers.

Aldi has done well out of former petrol station sites because of their strong locations and parking facilities, while the decline in petrol stations has given a boost to the rate at which it has been able to grow. Aldi Swindon region managing director Peter Casey explains: “There are many benefits in taking petrol stations because many are positioned on main intersections and roads in and around town centres. Location is absolutely key. It’s right up there as what most influences customers to shop at a store.”

Although former petrol stations or pubs only represent a relatively small proportion of Aldi’s portfolio – about 10 per cent of its sites under construction or due to be developed are in this category – it has been one of a number of ways for the retailer to secure the type of store it wants.

Casey adds: “The growth of Aldi is representative of the change in the way that land is used. It’s a reflection of changes in the retail landscape. Increasingly, we’re looking to ensure that we’re conveniently located for shoppers who haven’t considered us because they haven’t had a store near them, and taking ex-petrol stations is a good way of doing that.”

Another virtue of acquiring such premises is the benefits to be gleaned from the space itself. Greig says that pubs often appeal to retailers because there is a natural crossover in space requirements. As pubs are often around 4,000 sq ft (370 sq m) and have a floor-to-ceiling height of around 8 ft (2.4 m), the sales space is ideal. Furthermore, because pubs also need both basement space for heavy duty equipment and space for deliveries, retailers often find they have ready-made sites for storage. Butterworth adds that for food retailers in particular – which are used to having more to do in terms of restructuring a building – a site that already has some of their requirements in place, such as room for refrigerators, is a big plus.

Another fundamental advantage of former pubs, and even more so of petrol stations, is that both usually include decent parking space. For retailers like Majestic Wines, this is a crucial requirement when considering new stores. Majestic trades out of five former pub sites and around a dozen former petrol stations.

Traditional forecourts and pubs may be in decline. But one industry’s downfall often presents another’s opportunity.

It won’t work for everyone, but there are those businesses for which it offers good space in a good location at a good price. What more could a retailer want?