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Service stations are an ever-present staple of the Australian landscape. Whether you’re driving around the suburbs, through the city, or travelling long distance across a state, you’re never far from one.
Despite the relatively low uptake of electric vehicles (EVs) in Australia to date, their presence has caused a lot of debate and stimulated many conversations around the future of service stations as an asset class and an amenity.
Traditionally seen as a secure and stable investment, the nation’s push to enhance access to electric vehicles is leading many to wonder how transitioning away from fossil fuel vehicles will impact the quintessential service station.
Short answer: it will, but not in the ways people imagine.
Last year, EV sales in Australia jumped 86 per cent representing a significant shift in the market and a strong indication of consumer attitudes. Notwithstanding EVs still only accounted for just over 8 per cent of new cars sold in Australia. In April this year, the Australian government announced a national EV strategy, which outlined a framework to bolster supply and give more Australians access to the myriad of benefits EVs offer financially and environmentally.
Following this announcement, the federal government allocated $7.4 million over four years to support the introduction of fuel efficiency standards, ultimately aimed at encouraging EV uptake.
While some think Australia’s EV boom will strip service stations of their relevance, emerging trends and industry awareness implies the contrary.
Yes, Australia’s EV boom appears imminent, albeit much later than other countries across the globe. But contrary to what many speculate, this doesn’t need to be a negative for service stations. In fact, it could be good news for tenants and property owners.
Service stations will continue to offer prime real estate and consistent investment opportunities.
Proof of this interest is the continued appetite for investment in Banner Asset Management’s Service Station and Convenience Store Property Fund, which offers an average lease term of at least 10 years to mostly national tenants. Longer leases and the continued ability to command a premium tenant make them an attractive proposition for investors.
EV charging will offer additional streams of revenue. The increased dwell time that comes with charging a vehicle, in comparison to a quick refuel, will shift how consumers interact with a service station. These longer dwell times provide an opportunity for service stations to become multimission destinations, reimagined as food, lifestyle and entertainment hubs.
Given that EV drivers typically belong to higher income brackets, an opportunity to promote and offer premium services exists. We can anticipate that the pursuit of higher quality will raise the standards of service stations. Property owners are likely to collaborate with premium tenants to provide exceptional hospitality, retail and lifestyle choices. There will also be a shift from fast food and grab-an-go options to more leisurely “pause and savour” dining experiences.
Additionally, the move towards EVs in commercial logistic fleets globally has highlighted the importance of implementing mid-route charging strategies. Service stations, with their prime locations, are well-positioned to fulfill this crucial role.
Even as access is amplified, EVs are still within their infancy in Australia, and we can expect a lengthy transition period, which may take up to 30 years – meaning tenants and property owners will have plenty of time to embrace the evolution. And for those who choose not to, the location of service stations lends themselves to an immense opportunity for redevelopment.
Simply put, it is a great time to invest in service stations. It is a market on an upward trajectory which analysis tells us will continue to grow, creating a perfect storm for the relevance, use and evolution of service stations.
Nicholas Lakin is the chief lending officer at Banner Asset Management.
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