Supermarket sweep

Living over the shop has moved on. Once upon a time it signified a Victorian flat above a corner shop. Now it could mean a modern penthouse above a huge supermarket. Supermarkets have been getting into the residential property game. Tesco arguably started it all in the 1990s but now other supermarkets and big retailers are joining in.

The current wave of residential activity by retailers seems largely prompted by the planning system. As Yolande Barnes, head of research at property firm Savills, says: "I think it is a way of buying planning permission. Out-of-town supermarkets ground to a halt but the need for social housing continues as a section 106 requirement. So I think it is not cynical to say that the supermarket developers saw this as a way of getting permission for the site."

Despite the boom in house prices, Barnes says money from sales of flats is not the biggest motivator - the average big supermarket could turn over more in a week than the plot is worth, she points out.

But putting homes above stores is not without its problems. Some supermarkets have a layer built between the roof of the store and flats above to prevent damage from overflowing baths and leaky washing machines which could cost shops serious money in lost revenue. Some are also looking into building the flats on a bridge so that the store can be redeveloped later without disturbing the homes. But not everyone in the industry is enthusiastic about this expensive engineering. Here, four of country's biggest supermarket chains give their stand on housing development.

Tesco

What is your policy on inclusion of housing alongside retail?

We don't have to be the lead developer - we are quite happy for the lead developer to bring Tesco in to take on the retail units or equally happy to lead as in some ways it gives us greater control. We are looking at developing retail floorspace but we are aware we can't do that in isolation now.

When did you start doing residential developments?

We did a couple in the early 1990s in Kensington and Hammersmith. Both were with entirely affordable housing above. It was effectively pre-sold so the commercial risk was not great. Since then we have done a number of smaller ones where we sold to investors or housing associations or sold on the open market or partnered with developers who sold the flats. We have also done one with houses on site rather than flats above in Stafford. There were 39 houses within the scheme but this was on a parcel of land we sold to housebuilder Bellway.

What's in the pipeline?

We have planning consent for 44 flats above a 3000 ft2 Tesco Express in Kingsbury, London. We have consent in Orpington for a 40,000 ft2 store with 73 flats above and in Hyams Park in north London for 60,000 ft2 with 78 flats above.

Who have you worked with?

Investor Grainger Trust, housing associations London & Quadrant in Orpington, Notting Hill Housing Trust at Kensington, Peabody Trust in Hammersmith, Trinity Developments in Bletchley.

Sainsbury's

What is your policy on inclusion of housing alongside retail?

Existing planning policies tend to dictate when we include housing alongside a retail development. Where there is a lead developer they tend to provide the housing and we bring the retail aspect to the party. For example, in Brighton we are part of a development where we are providing the retail aspect and Barratt is providing the housing aspect.

However, we have also been involved in schemes where we have provided the retail and housing, such as our scheme at Maidenhead.

When did you start doing residential developments?

It is not new in development terms for us. One of the first was the Cromwell Road store in west London.

What's in the pipeline?

We are looking at various developments as part of our pipeline including those with housing. The largest is in Selly Oak, Birmingham. We are building a new store and housing on a 40-acre site and the existing store on a nearby site will be replaced with housing once the new one is built. There will be hundreds of units for key workers.

Who have you worked with?

At Maidenhead we are working with Maidenhead and District Housing Association. We worked with Network Housing Group on our store in Pimlico, which has 80 flats above, half of which are social housing. We have also worked with housebuilders Redrow, Crest Nicholson, Barratt and Berkeley.

Asda

What's your policy on inclusion of housing alongside retail?

This year will see hundreds of new homes resulting from our stores. Each scheme is assessed on its individual merits and we work closely with local authorities to understand what is required in their communities. So even in those cases where we are not the lead developer we are very aware of what is required in specific areas and if that means residential, we are happy to consider it. Mixed use developments play a key part in our store development strategy.

When did you start doing residential developments?

We've been delivering mixed-use schemes for years, although they have played a more fundamental part over the last few years. We have developed approximately 1000 homes in the past three years.

What's in the pipeline?

We have just opened Romford, which is a redevelopment of a former leisure centre, done in partnership with The Mall, operators of the Liberty 2 Shopping Centre, and Barratt Homes. It includes 229 new homes, a mix of private and affordable units and a 50,000 ft2 store. Hounslow and Feltham in west London will follow. In Hounslow, proposals include an Asda store and 484 private sale and keyworker residential units and Feltham will be an 80,000 ft2 store, the refurbishment of the existing shopping centre with new retail, leisure and office space and 300 residential units.

Who have you worked with?

Barratt, Crest Nicholson and housing association Optima.

Waitrose

What is your policy on inclusion of housing alongside retail?

If it is possible to produce an effective scheme that includes housing alongside a shop, then this would be carefully considered. Waitrose would assess each opportunity separately, whether as the lead developer or working in partnership with another developer. Any mixed-use scheme would need to be beneficial to the community.

When did you start doing residential developments?

In 2005, Waitrose was able to include both affordable housing and private residential development as part of a mixed-use scheme in West Ealing. Ealing council was already working with Asra Greater London Housing Association to develop affordable housing and Waitrose made a financial contribution to their building of 35 affordable residential units. The construction company Wates built both the Waitrose food shop and the residential units. The relocation of the shop enabled the land the previous shop was built on to be sold to Nicholas King Homes, a private housing developer.

What's in the pipeline?

Waitrose has a number of mixed-use developments either in the planning process or under construction. In Ampthill, in Bedfordshire, the retailer is constructing 17 apartments alongside its new food shop. In Maidenhead, Waitrose has submitted a planning application to extend its food shop and this includes 14 residential units.

Who have you worked with?

Asra, Wates, Nicholas King Homes.