With the use of electric vehicles (EVs) on the rise, there are concerns about the future of service stations, with new data showing sales have slowed this year.
Ray White Head of Research, Vanessa Rader, said the rise of electric vehicles had forced service station operators to adapt and also contributed to transactions reaching just $40 million in 2024 so far.
However, she said there was still plenty of need for traditional service stations, particularly those with additional income streams.
“While EVs have grown in popularity, particularly given the rapid rise in fuel costs, the continued development of new petrol stations has given confidence to the longevity of the asset class,” Ms Rader said.
“Over the last few years, we saw turnover levels show some volatility dependent upon volume of larger portfolio sales, however, activity peaked in 2022 when volumes eclipsed $1 billion for the first time.
“This high rate attributed to not only the growth in sales numbers but also the rapid escalation in values, as yield ranges fell to as low as 3.9 per cent with a 5.9 per cent annual average.”
Ms Rader said in 2023 volumes reduced 45.6 per cent, while the first few months of 2024 had only recorded a handful of sales totalling about $40 million.
“This reduction in sales activity has been heavily influenced by changing availability and cost of finance more so than a turnaround in sentiment towards the actual asset class dominated by private investors, syndicates and developers,” she said.
She said buyers had been far more discerning recently, seeking out high performing establishments with a long-term view on food, entertainment and charging offerings, which was “the secret sauce” for service station longevity.
“Buyers have been more considered regarding local competition, future supply, land banking or development opportunities in the medium to longer term putting upward pressure on yields for more secondary locations or assets, a trend expected to continue this year,” she said.
“However, the expectation of interest rate reductions this year is anticipated to spur on activity for prime service station assets keeping yields competitive and new supply projects continuing.
“These new projects with a strong commitment to catering for EV customers, fast and ultrafast charging facilities, improved in store experiences or multiple onsite offerings including entertainment revolutionising what a service station will be into the future.”
Ms Rader said the number of charging locations had increased 75 per cent in 2023, with growing needs ensuring this rate of increase is set to continue, offering service station owners another income stream.
“While Australia is home to approximately 21 million privately owned vehicles, the need for fuel will not dissipate and service stations will remain a major need in our communities,” she said.
“State policy surrounding the use of EV vehicles, subsidies and discounts have done much to stimulate investment into these vehicles with 8.5 per cent of new sales in 2023 representing battery electric vehicles and plug-in hybrid electric vehicles, a huge uptick on previous years.
“While it’s anticipated that it will take more than 30 years for EVs to be the dominant vehicle on our roads, the requirement for service stations in their current form will not go away; giving confidence to existing investors and those seeking out service station investment.”
