NSW service station market sees resurgence

The NSW service station market has seen resurgence in both new sites being constructed and investor interest, according to Knight Frank’s latest Research report, NSW Service Station Insight: February 2017.

Findings of the report were discussed by a panel of experts at a Knight Frank event in Sydney last night.

The panel included members from Rostron Carlyle, Consara, Holden Capital Finance and UCB, alongside Knight Frank’s Director, Service Stations Jason March and Director, Research & Consulting Paul Savitz.

According to Mr March, “There is a strong appetite for service stations in Australia.

This asset class is no longer just for mum and dad investors.

They have evolved and have a diverse range of buyers now seeking to add service stations to their investment portfolios and superannuation funds.

“The appeal to investors in recent years has been underpinned by long-term lease covenants, with fuel companies providing stable income with relatively low costs associated with these assets.

“The demand for service stations will remain high, as competition in the sector continues to grow and investment yields remain attractive to developers and investors alike,” said Mr March.

According to the report, service station sales in NSW totalled $175.5 million in 2016 – 48 per cent above 2015 levels.

“The development of new service stations in NSW is increasing with 38 new-to-industry (NTI) sites established in 2015 and 2016.

Development has been concentrated in key growth corridors where population growth has been significant,” said Mr March.

In the latest deal negotiated by Mr March, a Junction Hill service station in Northern NSW has sold for $1.3 million plus GST to Shane Punton PTY LTD.

Located on 5 Casino Road, Junction Hill, the 1,255 square metre Caltex station received strong interest with multiple offers. Mr March said that multiple offers were received for the property.

Prior to this, recent sales by Knight Frank further up the coast in south-east Queensland include Puma Loganlea, which sold for $6 million; BP Capalaba East for $3.65 million; Neumanns Alexandra Headlands for $2.5 million; Choice Coopers Plains for $2.2 million and BP Kilcoy for $2.5 million.

According to Mr Savitz, the rationalisation of sites and industry amalgamations have been significant over the past decade, as traditional operators began to focus on upstream activities – making way for the entry of the supermarket chains in the early 2000s.

“With secure, globally-recognised tenants offering solid leasing covenants and long-term cash flow, interest in the service station sector has grown rapidly in recent years.

Over the past two decades, the service station industry has changed markedly with traditional fuel providers reducing retail operations to focus on the more profitable upstream oil and gas sector.

“Once dominated by the likes of Shell, BP, Mobil and Caltex, the entry of supermarket brands raised the stakes – ultimately increasing competition and altering the traditional model of what consumers

are being provided.”

Mr Savitz said that in line with the population, NSW accounts for the largest number of service stations in Australia at 30 per cent; moderately above VIC and QLD at 22 per cent respectively.

“Service station ownership in NSW is highly concentrated within a select group of operators, with the four largest providers by brand accounting for 50 per cent of NSW service stations.

Caltex, BP, Shell-Coles Express and 7Eleven are the largest players.

“Through industry amalgamations, the rationalisation of sites and a larger volume of fuel being sold from each site, the number of petrol stations in operation within Australia has declined to approximately 6,400 – down from 8,370 in 2000 and around 20,000 in the 1970s.”

Mr March said the ownership structure of the service station sector is anticipated to change further over the next five years.

“Coles and other independent operators are expected to increase their presence in the industry.

In the short term however, an interesting period lies ahead as BP’s purchase of the Woolworths service station business flows through and both established and new industry entrants look to gain market share,” said Mr March.

To meet the growing demand for service stations across Australia, Knight Frank has recently expanded its service stations team, with Knight Frank’s Associate Director, Service Stations, Kim Munro joining the firm at the start of this month.

“Kim comes to Knight Frank with extensive experience in the fuel industry and we’re confident he’ll help us continue to be one of the leaders in service station sales in Australia,” concluded Mr March.

A retail service station at 16 Murray Street, Finley (above) has been listed for auction.

Similarly a retail service station at Lot 8, 24-30 Lagonda Drive, Ingleburn (below) has been listed for sale.

A retail service station at 86 Macintosh Street, Forster (below) was sold.

Similarly a service station at 162-166 Pioneer Road, Towradgi (below) was sold for $5,615,000.