Service station sector continues to expand along with EVs

Despite the rise in electric vehicles, the service station sector continues to expand at a steady pace.

 

Ray White Commercial Head of Research Vanessa Rader said demand from investors is still very high, as service stations change their offerings to customers.

 

“Service station new development has been high over the past ten years, over this time we have seen an evolution of their offering, with a greater focus on quality food, shopping and overall comfort,” Ms Rader said.

 

“High coffee sales and parcel collection points has seen the average customer time increase, as operators look to expand their offering to include fast charge; with charging taking from 10 to 60 minutes, the experience at your local service station will continue to change.”

 

While groups such as Caltex/Ampol were first to explore this, the limited uptake by Australians has seen the rollout slow according to Ms Rader.

 

“Hybrid vehicles still require fuel and with the vast majority of Australia’s fleet still requiring petrol, the future of service stations looks to remain strong,” she said.

 

“Also considering other ‘green vehicle’ options, such as hydrogen, further emphasises an ongoing need for these assets, with hydrogen the alternative fuel source stored in underground tanks.

 

“Investment into service stations certainly has not slowed, with sales into these assets peaking in 2021 with close to $1 billion in volume recorded as transactions approached 300.

 

Ms Rader said the ongoing quest to source a quality “set and forget” asset over the last few years was paramount, as interest rates fell and investment yields contract across the country.

 

“While yields continue to range vastly, quality metropolitan offerings currently average 3.9 per cent yet can range as little as 2 per cent or up to 6 per cent depending on location, quality of asset and lease covenant,” she said.

 

“During 2022, and with interest rates rising, there is greater caution in the marketplace; while sales completed this year have maintained the low yield levels of 2021, volumes are expected to fall.

 

“While the threat of EV is low in the short- to medium-term, like other “set and forget” assets, exit strategies are increasingly important for service stations, including future opportunities for hydrogen, and possible issues such as contamination must be considered.”