High investor demand for petrol station sites

Posted On Thursday, 04 August 2011 02:00 Published by
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As the commercial property sector starts to rebound, consumers, retailers, investors and landlords alike, are re-emerging with a renewed interest in solid, income producing commercial assets

According to Greg Nafte of Auction Alliance, “currently, the property types which are the most sought after amongst investors are the ones which displayed stability and perseverance throughout the financial crisis, and a prime example of this type of asset, is petrol station sites.  Since Auction Alliance entered the petrol station sector in 2008, at the height of the recession, investor demand for petrol station sites has shown no signs of abating”.

“The robust demand for these solid, income generating assets, is evident in the string of prominent petrol station sales which we have concluded since becoming active in the sector. However, in spite of petrol station sites remaining of strong interest to investors on a national level, there is currently insufficient stock available to meet investor requirements”, he says.

He maintains that this sector is becoming increasingly attractive to property investors, property companies and private individuals, due to the blue chip covenants, long term leases, rental growth prospects and appealing lot sizes characteristic of petrol station sites.  Another appealing factor for investors is the prominent location of numerous petrol station sites, many of which are situated in easily accessible corner locations, along main arterials, with excellent exposure and visibility.

“Currently, there are 4 key types of petrol station sites that are attracting the most attention from investors. These include, Oil Company leased sites, high volume owner occupied sites, low volume redevelopment sites and petrol stations where the supply agreement with the oil company is nearing an end or has ended”, he says.

The solid income streams offered by Oil Company leased sites, where the oil company has a lease over the property, and the buyer is essentially purchasing the property for the rental income, are extremely desirable amongst investors. The second type of petrol station site attracting substantial interest, are high volume owner occupied sites, where the property and business is for sale, and the petrol station is pumping in excess of 30 000 litres. Comments Nafte, “The appeal of owning both the property and the business, together with the sizeable returns offered by this type of investment, has made it highly attractive to investors”.

The third asset namely, low volume redevelopment sites, where volumes have declined and the property and petrol station needs to be upgraded, have been achieving prices in excess of market value on auction floors. Lastly, petrol station sites, where the supply agreement with the oil company is coming to an end or has ended, offers new oil companies entering the market, the opportunity to acquire rebranding opportunities as well as the chance to take over the supply of the property.

In addition to strong oil company covenants, the increasing appetite from convenience store operators is creating further appeal within the sector. In line with the constantly changing lifestyle requirements and preferences of consumers, there has been an upward trend in recent years, of converting petrol station sites into one stop convenience centres.

“The petrol stations which are offering a strong convenience aspect, are braced to benefit from this trend, because, a sites fuel volume performance is stronger when it has a strong convenience offer. A number of prominent South African retailers such as Pick N Pay and Woolworths are capitalising on the accelerating appeal of one stop fuel and food purchases”

He asserts, that based on Auction Alliance’s highly successful track record with petrol station sales, the auction mechanism has proven to be a highly effective means of selling this type of asset. Apart from simplifying the process of screening able buyers, the competitive and fast-paced atmosphere characteristic of an auction event, ensures that the maximum value on a property is achieved.

Notable petrol sales concluded by Auction Alliance include an Engen in Protea Heights Brackenfell, for R9 million, Shell Noordehoek for R16 million, Caltex Kuils River for R 2.3 million, and a BP in Norwood, Johannesburg for R7.2 million.

For more information, or to have a similar property sold or valued contact Greg Nafte on Tel: 083 414 4474 or Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Publisher: eProp
Source: AG

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