A strong development pipeline of new petrol stations across Australia is set to create ongoing investment opportunities, despite continued headwinds about electric vehicles entering the mainstream private car market.
This is one of the conclusions from a new CBRE market review, which highlights that 186 new petrol stations will be built nationally over the next 12 months, led by Queensland (58), Victoria (43) and New South Wales (38).
CBRE’s petrol station specialist Joseph Du Rieu acknowledged that an increase in supply of this magnitude would typically result in reduced pressure on prices, however, given these developments were being staggered, pricing had either remained steady or slightly in favour of vendors.
“The number of new projects coming online reflects the confidence major companies have in the sector, where they typically look to enter into 15-year leases – resonating with the investor market,” explained Mr Du Rieu.
CBRE’s recent transaction of a new 7-Eleven service station in Werribee, which sold for $5.93 million to a private Melbourne based investor on a yield of 5.04%, further highlights this trend.
The newly built service station, which features a 15-year net lease with fixed annual increases, attracted both domestic and international buyers.
Mr Du Rieu noted that CBRE was continuing to field strong demand from both private and institutional investors for petrol station assets.
“Given the growth, security and prominence of these landholdings, and the modern technology around the environmental aspect, as investors look to the future of the market they are recognising the alternative retail and commercial value of these sites,” Mr Du Rieu said.
Private cars continue to be the most popular means of transport in Australia, with 66.1% of Australians either driving to work or being a passenger in a private car – an increase from 65% in 2011.
While the proportion of electric vehicles in production in Australia is expected to reach 50% by the 2030s, translating to less than 14% of cars being electric, there will be a continued need for petrol filling stations into the future.
However, the increase in electric vehicle production has been enough to see a shift in the way major energy companies are operating, with Shell being one of the first to make a move.
In the past 12-months, Shell has installed fast charging terminals at 80 Shell petrol stations across the UK, Netherlands and China, offering a Shell Recharge service that charges an electric vehicle in just 30 minutes.
Mr Du Rieu said; “With potential for the implementation of fast charging services in future Australian petrol stations, it is likely that operators will continue to grow their retail offering and build on the services they provide customers while they charge their cars.”
Close to $40 million of petrol station investments sold across Australia in Q1, with tier one tenancies like Coles Express and 7-Eleven resulting in strong yields of less than 6% for assets in strong inner metropolitan locations with attractive underlying land components.
CBRE’s Kevin Tong noted; “We have seen growing interest from both the domestic private investor market and the international buyer market, particularly investors of Chinese heritage, given the long-term security associated with petrol station leases.”
“The modern nature of improvements and net lease structures that are typical of these investments have been popular, providing depreciation benefits and a secure income stream.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
