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Strong demand for high-yielding commercial properties is driving strong sale figures for service stations, with an expert forecasting this trend to not die down anytime soon.
Jones Real Estate managing director Paul Jones stated that based on recent transactions, there is strong appetite for petrol stations both from private and institutional investors.
“We are predominantly seeing private investor activity; however, institutional investors are seeking service centre portfolios given the substantial income streams, long-term weighted average lease expiries (WALEs), and tenant credentials to add to their portfolios,” he commented.
The head of the commercial real estate agency cited that the asset class’ historical performance has made it a sought-after listing among commercial property buyers.
Mr Jones’ comments come off the back of the sale of a service station located in Dandenong South — which was acquired for a whopping $8.5 million through an on-market sales campaign by the firm.
The 2,973-square metre property was purchased by a regional Victoria-based private investor, with the transaction yielding 5.5 per cent annually.
Highlighting the strong demand for the asset, Mr Jones disclosed that the campaign received 150 registered inquiries from both institutional and private investors.
Notably, this marks the second time the particular service station has changed hands in recent times, with Mr Jones stating that the previous investor divested the service station in order to restructure their portfolio of assets in Victoria.
Mr Jones also pointed out that another United Petroleum property in Cranbourne North was sold in the last 24 months — a trend which Mr Jones attributed to the significant demand for leased properties occupied by trusted tenants that will deliver robust passive income streams.
Weighing in on why the asset class was snapped up quickly, he stated that “it is rare to find passive investment opportunities underpinned by blue-chip national and international essential service companies, like United Petroleum, with 10-15 year lease terms and fixed annual increases”.
“Investors like the long-term income stream in high-profile locations that typically offer long-term redevelopment potential as well. Most commercial investments have three- to five-year weighted average lease expiries (WALEs),” he added.
Looking forward, Mr Jones expects the demand for petrol stations to increase.
“Fundamentally, [this asset class’] high-exposure locations and accessibility, coupled with its flexibility for future uses and the trusted brands which lease the sites, all weigh into this forecasted future performance.
“Furthermore, changes to day-to-day operations, with increased focus on elevating food and beverage offerings, additional retail, parcel delivery integrations, and the adoption of electric and hydrogen vehicle charging and servicing facilities should drive further investment activity moving forward,” he concluded.
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