The proposed tie-up between Sainsbury and Asda could have as much to do with the value of their large logistics property portfolios as it does with retail.
Both Asda and Sainsbury are expected to take advantage of the tie-up to drive down supply chain costs, including warehousing.
However, a turn in the property market in the last three years means their multi-million sq ft warehouse portfolios could be worth more than their shops. Yields for big box warehousing typically hover between 4.5-5.5%, sometimes a keener return than for retail outlets. Rationalising the portfolio could provide real cash benefits.
Sainsbury largely pulled out of the warehouse property scene in 2014, scalling back a large acquisitions programme.
Figures from Barbour ABI show that take-up of new logistics floorspace by six mid-market and discount grocers plunged from 1.7m sq ft in 2013, 1.9m sq ft in 2014, but plunged to a pipeline of just 893,000 sq ft in 2015 once Sainsbury and Tesco had pulled out.
Asda Logistics Services includes 39 operations nationwide including 21 food depots, three clothing centres, two ambient GM hubs, two import centres, two dot.com fulfilment centres and nine ASCs.
