Petrol station market continues
to attract investors
Property services group Barber Wadlow, which specialises in petrol and service stations, has teamed up with Experian Catalist to publish a list of value indices for independently owned sites
These account for 63% of the UK’s petrol stations, and are the only vacant sites in the country that are “actively” traded.
The value of “mid-range” dealer sites — sites with average levels of trading performance — has fallen by 28% in the last 12 months, and by 36% since the peak of the market in 2007. But trading levels for these sites are still low in comparison with “top-end” sites — the top quarter of sites in terms of trading performance — where values have only fallen by 14% since the start of 2009.
The fall in values is primarily because purchasers cannot access finance. However, there are some well-funded investors who are continuing to buy up sites, and some of these are new entrants to the market.
Ownership is still fragmented, and the top 10 traders only account for around 10% of independently owned petrol stations. Investors are focusing on the better-performing sites, which account for 23% of the network.
Last year, planning or procurement issues meant that only 24 new petrol stations were developed. The supply of good sites without planning constraints therefore remains limited.
There was exceptional growth in values between 2000 and 2007. The prices of “top-end” sites rose by 66% and the average value of “mid-range” sites increased by 137%. By comparison, the IPD Retail Property Index increased by 65% over the same period.
The rise in value on “mid-range” sites was caused by the closure of poorly performing sites. Since 2000, almost a third of all sites have been closed, and this has driven up the trading performance of the remaining mid-range petrol stations. Fuel sales have risen by 40% and sales on forecourt shops have more than doubled.
The improvement in trading is also the result of better facilities — 25% of forecourts now have an off licence and 40% have cash machines. There is, however, scope for further investment as only 15% of sites provide a convenience store.
Retail sales at petrol stations have remained strong. Although fuel sales are down by 10%-20%, sales at forecourt stores have been steady. The latter provide gross profit margins of 20% to 25%, compared with fuel margins of between 3% and 6%. As a result, estimated rental values have fallen by just 3% for “top-end” sites and by 14% for “mid-range” sites.
Barber Wadlow expects the value of sites to rise, but the funding crisis will continue to limit price inflation.