Sydney’s changing road network fuels major changes to service station market

Significant land banking and value are set to be unlocked due to the major changes to Sydney's public transport and road network system.

Opportunities are likely to be added along major arterials across the city.

CBRE's Victor Sheu told SMH that the new WestConnex tunnel project would divert traffic flow and commuters from the M4, unlocking greater commercial opportunities in the city’s Inner West.

“Service stations are already among the most sought after commercial assets, with properties secured by five – ten year leases achieving record tight yields," Sheu said.

"This is further exemplified by the severe shortage of commercial investment properties readily available to satisfy the growing investment mandate across Sydney at present."

“With 16 service stations located along Parramatta Road, the current changes to the city’s infrastructure network present attractive investment and land banking opportunities – with these properties underpinned by strong underlying land values as well as long term leases for immediate income.”

Sheu said changes in the city’s transport network – coupled with the rise of sustainable energy – could prompt further changes in the service station sector.

“With more leading vehicle manufacturers taking a step towards alternate energy sources, introducing both hybrid and fuel-free models, there is likely to be decreased demand on petrol – and subsequently the stations that service them."

“Given service stations are currently trading at a market peak, we expect owners to look at reassessing the use of these assets – either looking at alternative commercial uses or expanding the service station model to incorporate more of a food and beverage element.”

Caltex has already expanded its service beyond the traditional service station offering, having recently partnered with breakfast cafe ‘The Foodary’.

“With service stations traditionally located on high exposure sites, there is a huge opportunity to expand the service station model to capitalise on the shifting business environment with a food and beverage component,” Sheu said.

“We’re likely to see more service stations adopt this strategy, in addition to some owners looking at re-evaluating their assets all together to maximize value.”