The NSW service station market has seen resurgence in both new sites being constructed and investor interest, according to Knight Frank’s latest research.
The report, titled NSW Service Station Insight: February 2017, revealed that service station sales in NSW totalled $175.5 million in 2016 – 48 per cent above 2015 levels.
Knight Frank Director for Service Stations Jason March said it was evident that 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,” Mr March said.
“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."Knight Frank Research & Consulting Paul Savitz said the rationalisation of sites and industry amalgamations has 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," he said.
"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.”
The service station market's latest activity was the same of Junction Hill station in Northern NSW for $1.3 million. In Queensland, Puma Loganlea station sold for $6 million, while BP Capalaba East was sold for $3.65 million.
Neumanns Alexandra Headlands went for $2.5 million, while Choice Coopers Plains sold for $2.2 million and BP Kilcoy for $2.5 million.