Land grabs and market power in retailing

The Observer carries an article today which focuses on what appears to be a spending spree by cash-rich supermarkets to take advantage of falling demand for and prices in the commercial property market.

According to the piece:

“Tesco and Asda, the biggest retailers, are committed to opening 2.5m sq ft of new space this year, while Sainsbury’s wants to add 2.5m sq ft - 15% of its floorspace - by March 2011. Morrisons is on track to open 1m sq ft by January 2011.”

Boarded up pubs and recently closed small to medium sized shops provide an opportunity for the major supermarket chains to purchase the land or their leases attached to a property. This opens up a chance to expand their range of smaller ‘convenience’ food stores and it also deprives their rivals including the less dominant food retail chains to grab a slice of the action. Land grabs as an entry barrier - we hear much about the damage that closed shops can have on footfall for nearby retailers, but the land purchases must surely raise some competition concerns. Unless competition policy has been temporarily ditched because of the recession?

Earlier this week Sainsbury’s raised £432m through an equity and bond issue to pay for 50 new stores and up to 50 extensions.

If supermarkets freely grazing on vacant buildings and land help to cause the extinction of independent food stores - is this an example of the tragedy of the commons?