Tesco will build hundreds of flats above its stores in a drive to increase its penetration of the London market.
Mayor of London Ken Livingstone's insistence that there should be residential space built alongside or over any commercial development in the capital has proved a barrier to food stores.
Tesco has already signed its first major private housing deal, working with residential investor Grainger Trust to build accommodation as part of its redevelopment of the former South London Women's Hospital at Clapham.
The project includes restoring the building's original facade, and will provide 104 flats above a Tesco store at ground level. The store is expected to open at the end of next year, with housing to be completed close to June 2006.
Tesco is also experimenting with housing above its Kensington and Hammersmith stores. It has also completed work on six flats above its new Express store at Wood Green, north London.
The supermarket has also applied for planning consent to re-develop its Express site at Islington, with 13 flats above the store.
Tesco's biggest mixed-use project in the pipeline is at Streatham, south London, where the retailer is awaiting Livingstone's decision on its plans to provide 250 homes, in addition to a foodstore and leisure facilities.