Aldi is moving into mixed-use development to secure sites across Melbourne and Sydney. Credit:RALPH ORLOWSKI Earlier this year Woolworths forked out $50 million to buy public broadcaster ABC's former studios in the Melbourne suburb of Elsternwick. Woolies is likely to apply for planning approval for a mixed-use, retail and apartment, development on the site. Once it gains planning approval it usually sells the site to a developer with plans for a Woolworths supermarket on-site with a long-term lease in place. Aldi's pipeline Aldi is working on a development in Narellan, Sydney, which, in addition to the Aldi store and its car park, will include three shops that will be leased to other businesses. Real estate agents have said this is unusual for Aldi.

JLL associate director Tom Noonan said there were a number of advantages for a retailer in owning their freehold assets. "When property prices rise, real estate can provide valuable capital growth and it also gives the freedom and security of tenure, which may not be available under a lease," Mr Noonan said. A spokeswoman for Aldi said: "Correctly zoned retail land suitable for an Aldi store, particularly throughout the inner suburbs of Sydney and Melbourne, is increasingly difficult to source. "Mixed-use developments provide an ideal outcome, where ground floor retail uses, such as an Aldi store, are paired with residential or commercial office uses on upper floors." Former competition tsar Graeme Samuel said Aldi's property portfolio was a "good common sense investment".

The Germans love to own their own real estate. Colliers head of retail Michael Bate "If I was Aldi I would do exactly the same thing," the former Australian Competition and Consumer Commission chairman said. "The major supermarkets chains [Woolworths and Coles] have shown themselves [to be] fairly adept in the past at blocking out Aldi and other competitors like Harris Farms and the like from choice sites. "What they generally try to do is buy sites that are generally not prime retail areas and then they build up the retail around them. And so the capital gain is very much enhanced by the way that they have built up the sites as they go along. "So you buy mixed use, you put in there an Aldi supermarket, then you add to that all the associated business, then suddenly the landholding becomes very valuable. You've got a valuable retail park."

Tested strategy Aldi's spokeswoman said the development approach was not a new strategy for Aldi. "There are many examples across Australia where an Aldi store has been incorporated into a mixed-use development where we haven't been able to build a freestanding store or lease appropriate space in an existing shopping centre," she said. Loading Michael Bate, head of retail at Colliers real estate, said Aldi's strategy in Victoria, NSW and Queensland had been "to infiltrate".



"In most cases that means developing their own centres [in Victoria, NSW and Queensland] and they do this very cleverly by adding six or so small specialities that in turn goes a long way to paying for the development," he said.



"They have thousands of these types of centres across the globe and are very specialised at delivering this format.



"The Germans love to own their own real estate. They have always preferred to own freehold rather than lease, and only lease as a last resort."

Aldi did not answer what percentage of its stores were owned, how many developments it had made, when it started doing developments and whether the pace of these developments had increased.