Today there are approximately 6,500 service stations in Australia. While this number has decreased significantly from the 25,000 stations across Australia in the 1970s, service stations are back on the up and up. Given the introduction of hybrid and electronic cars, the increase in ride-share options and the imminent arrival of driverless cars, why are petrol stations such hot property?
In the short-term, service stations are particularly attractive to investors. Depending on the station’s location, the tenant and type of lease, this asset class is returning investors yields between 6 – 7%. Newly built service stations are particularly attractive, as the new tanks and lines are highly depreciable items, adding to the investment appeal.
While attractive in the short-term, none of this speaks to the long-term appeal of a service station. According to AECOM’s report, Fuelling the Future, the real future value of a service station is not in fuel, although they will continue to offer it for at least the next two to three decades. The real value is their strategic locations: a service station is a relatively large, well-connected site, positioned in an urban area close to people, homes and businesses.
This connectivity provides service stations with the opportunity to shift with Australian’s needs. Whether or not the stations will be pumping petrol, LPG, or charging electric vehicles, the future potential of these sites is a blend of food, retail and convenience.
Market leaders are already expanding their offerings and are becoming one-stop-shops. Over the past 12 months, Niclin Group has designed and constructed six service stations across Queensland. Each of these facilities had a blend of food and fuel. The stations we are currently pricing for clients are continuing to push the envelope on what a petrol station can be even further, including other retail.
According to Niclin Group’s Business Development Manager, Rob Alpe, “We do not see any slowdown in demand for this product. What we are seeing is an increase in diversified sites that require a more tailored design and construct approach that minimises both client risk and cost.”