A “STRONG investment appetite for service stations” has prompted fuel and convenience store retailers Jasbe Petroleum and United to sell outer suburban outlets.
A turnaround in sluggish conditions in the four years to June 2016 has prompted a $5 million sale of a 7-Eleven outlet in Sebastopol, just outside Ballarat, CBRE says.
Ibis World reports this year pointed to headwinds experienced by the sector that had crimped growth. “Volatile consumer sentiment, fluctuating household disposable income growth and continued competition from small-format grocery stores … have challenged industry operators,” Ibis World said.
However, the research indicated good prospects for non-metropolitan operators in growth corridors when they reviewed their pricing and product ranges.
CBRE retail investment expert Joseph Du Rieu said: “The broad research likely reflected conditions faced by inner metropolitan outlets which were competing with an IGA grocery store on every corner and a downward trend in car ownership.
“The outlets we are marketing in outer suburban and regional areas are in growth corridors where the population is booming, households have multiple cars and it can be a long and inconvenient drive to a major supermarket.
“All these factors make it compelling for fuel and convenience stores to be located close to new, outlying residential estates and these are the locations where the assets we are marketing happen to be.”
Mr Du Rieu said the price achieved for the Sebastopol 7-Eleven was very strong with a low yield of around 5 per cent, indicating that the asset was in the same league as a premium, inner-suburban one.
“Over the past six to 12 months we have seen the gap in yields close between inner and outer properties in this sector,” he said.
“Two years ago, you would see yields of around 7 per cent, but today investors see value outside the metropolitan district.” Mr Du Rieu said the fact the Sebastopol outlet was one-and-a-half hours’ drive from the CBD and still attracted 17 bidders showed distance was no issue in investors’ minds.
“There is no doubt of an upturn in transaction activity in the service station investment market,” Mr Du Rieu said.
“Retail investors are continuing their flight to quality, defensive and non-discretionary assets.
“Convenience retail and fuel offer that opportunity for buyers in the sub-$10 million price bracket who may not otherwise have the capacity or ability to secure a freestanding supermarket.”
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