to letAs the recession appears to continue unabated, it becomes clear that in any given situation there will always be winners and losers. And the recession is no exception.

As new building developments stand empty and construction sites remain unfinished it becomes evident that the recession has paused the purchase and development of new residential and commercial space. In the U.S. some states are removing or reducing impact fees – charged by municipalities nationwide to pay for the additional services that come with increased development, such as schools, sewer lines and roads – to try and bolster development in these financial trying times (Boston.com).

Whilst the financial crisis has halted development and expansion for the vast majority, others are using this ‘construction pause’ as an opportunity. Some retailers have been able to benefit from falling land and property prices and the quicker processing of planning applications, to expand their operations into both new land and deserted ex-retail space.

Seemingly unaffected by decreased access to credit, large retailers are snapping up land and new developments. With retailers like Woolworths and Zavvi going bust, new sites are constantly emerging and this pattern is likely to continue as long as the recession does. For example, earlier this month Sainsbury’s announced that it would seek to raise additional capital worth £445m as a direct response to the opportunities currently available to develop new space. This investment will enable Sainsbury’s to open an additional 15% gross space, equating to 2.5m sq ft of additional selling area, over the next two years.

Morrisons also announced in March 2008 that it had identified up to 100 new locations which could accommodate one of its stores and would therefore add a further one million square feet on top of what was initially set out within its ‘Optimisation Plan’ (IDG).

Whilst on the surface this may seem like a simple trend of expansion, for supermarkets in particular, expanding retail space is an important factor in gaining market share and cornering markets, particularly to anticipate increased sales when the recession ends. This spatial expansion has ramifications for the smaller or independent stores who may no longer have the same options in terms of their own expansion into new retail space and may be crowded out by chains of supermarkets that come to dominate the high street.

The recession serves to amplify strengths and weaknesses – almost a process of natural selection – as the strongest and largest (in terms of size and financial strength) are better able to hold their position and even better it, whilst the smaller and weaker retailers are likely to struggle, at best maintaining their position, at worst, folding. To reiterate then, there are always winners and losers but closely monitoring this trend and what it may mean for suppliers and producers, particularly in the developing world, may reveal a great deal about supply chain dynamics and the impact these dynamics have on producers, either positive or negative. This could ultimately help better inform policy.

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