Essential status fuels demand for service stations

Published on: 20 November 2020

Sales of service stations surged 55 per cent over the past 12 months to more than $600 million as investors flocked to the “essential service” asset class during the pandemic.

Over the year to October, 109 service stations worth $614 million changed hand at an average yield of 5.74 per cent, according to figures compiled by commercial property agency Burgess Rawson.

This compared with 75 sales worth $396 million struck at an average yield of 6.12 per cent over the previous 12 months.

The Penrith 7-Eleven sold on a strong yield of 3.7 per cent.

“As fuel is a non-discretionary purchase and a major component of the weekly budget essentials for Australians, the $31.4 billion industry remained relatively immune to the impact of COVID-19,” said Burgess Rawson director Raoul Holderhead.

“Throughout the year, demand for high quality retail fuel investments has remained strong.”

Since the World Health Organisation declared COVID-19 a pandemic on March 11, there have been 51 fuel sales worth a combined $294 million at an average yield of 6.10 per cent, according to Burgess Rawson.

The Burgess Rawson figures exclude large institutional portfolio sales, which also highlight the desirability of the asset class.

These include Charter Hall buying a 49 per cent interest in 225 BP sites worth $840 million and Charter Hall and GIC buying a 49 per cent interest in 203 Ampol/Caltex sites for $682 million. 

Concerns about how the rise of electric vehicles may impact future demand for fuel retailing appear to have receded in investors’ minds given the long leases and large land holdings, often in sought-after metro and suburban locations where housing demand is strong.

Highlighting the appetite for the asset class, last month Financial Review Rich Lister Russell Withers’ 7-Eleven chain sold a petrol station and convenience store in Penrith in western Sydney for $4.95 million on a tight yield of 3.7 per cent.

The property, on a corner site of more than half a hectare, came with a new 12-year lease to 7-Eleven and fixed 3 per cent annual rent increases.

Burgess Rawson selling agents Simon Staddon and Billy Holderhead said the 3.7 per cent yield was likely a post-COVID record for a single tenant investment.

Also selling at the same auction was a United petrol station and Pie Face store in Gladstone, Queensland, backed by a 15-year lease. It sold for $5.68 million on a yield of 5.5 per cent.

Demand for the asset class heading into the Christmas period will be tested when Burgess Rawson offers eight service stations for sale at a portfolio auction in early December.

Among the properties for sale is a 7-Eleven at Waverley Gardens Shopping Centre in Melbourne’s inner south-east with a lease running until 2035. It is expected to sell for more than $5 million.

Originally published on acapmag.com.au

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