Service station assets have been favoured by investors for their security throughout the pandemic.
There were some 47 service station transactions made in Queensland during the 2020/21 financial year with a total value of $312 million and an average yield of 6.17 per cent.
Selling yields have compressed with lower interest rates and have ranged from 4.5 per cent to 8.8 per cent.
The number of transactions is up 34 per cent since the 2019/20 financial year when 31 service stations were sold for a total value of $188.4 million.
Ray White Commercial QLD salesperson Stephen Kidd said service stations were often underpinned by national tenant covenants and strong rental increases which drove their popularity with investors.
“Transactions in Queensland over the past financial year have been recorded with an average lease expiry of 11.3 years, some offering lease terms as high as 20-years,” Mr Kidd said.
“With significant corporate and bank guarantees securing these lease terms, many investors are applying little risk to the future rollout of EV’s and alternative fuel options within the current investment horizon.
“Investor interest remains strong for those properties where responsibility for remediation is clearly defined.”
“We are beginning to see more baseline reports forming part of the lease, this being used to determine each parties’ responsibilities.
“Investors are sensibly also looking for sites which are of size to offer alternative usages, should the tenant eventually vacate.”
In 2020/21 7-Eleven anchored service stations accounted for 36 per cent of transactions in Queensland, followed by Coles/Shell at 11 per cent, and Caltex at 9 per cent.
While there remain plenty of opportunities for service station assets, Mr Kidd, who works alongside his son Elliot Kidd, said they had realised there was a large gap in the convenience retail leasing market for those centres anchored with fuel.
“The fuel component tended to be quite straightforward with multiple offers from providers on each campaign,” he said.
“The challenge to most fuel developments was in the leasing of the retail/drive-thru pad sites.
“To help our landlords with this common problem, Elliot has focused on expanding our tenant database since then. His focus has been on medical, specialty strip retail, food, and drive-thru operators.
“We now have an extensive database of over 500 active food tenants looking to expand all across Queensland and NSW.”
One of the investment opportunities which is currently on the market includes Stage 2 of the Rothwell Edge development at 560 Anzac Avenue.
This investment comprises a stunning new Pearl Energy service station supported by a dual lane drive-through and outdoor eating area.
Pearl Energy is a rapidly expanding eastern seaboard discount fuel chain operating 50+ existing sites with a further 20 currently under construction.
Greek food sensation The Yiros Shop has taken a 10-year lease over a 130sqm store with twin lane drive-through.
Another investment opportunity includes the Metro Petroleum service station at Edith Street, Innisfail.
With a new 10-year lease, the state-of-the-art new concept Metro Petroleum includes Mr Whippy and Cold Rock ice cream.
For further information or a copy of their service station sales report for 2020/21, please contact either of the father and son team from Ray White.