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Positive outlook as demand for forecourts remains strong, says Christie & Co

Merril Boulton ·
Steve Rodell

After years of divestment, oil companies look set to shake up the petrol filling station market in 2019, according to Steve Rodell, managing director retail, at property specialist Christie & Co, in the company’s latest report on the market, entitled ‘Navigate, Innovate, Accelerate’.

“We could see a rash of activity from returning buyers such as Phillips 66 (Jet) and Certas Energy (Gulf),”states Rodell. “Prax Petroleum (Harvest) set the tone for oil company investment in 2018 by acquiring HKS. All are likely to increase purchasing activity in 2019.”

Last year Rodell accurately predicted more group deals, with private equity playing a key role in that. The biggest deal was the acquisition of MRH (GB) which included 488 sites, by the Motor Fuel Group. Other notable transactions were MFG’s acquisition of the Golden Cross Group (14 sites), Stratford Capital buying out MPK (17 sites) and the Prax Group buying HKS (68 sites). The biggest surprise was the acquisition of NJB Services (4 sites) by Phillips 66, indicating a change of strategy.

“Interestingly the thing we didn’t predict was the oil companies coming in. The market has been so aggressively targeted by the mainstream oil companies. If you’re an independent dealer and you have the opportunity to have a major brand on your forecourt - without disrespect to the other brands - you’d probably go for those because it drives a lot of business. Customers like top brands. The secondary brands will be wondering how they can keep the number of sites with their brand, and increase supply. If they can’t do it by competing in the dealer supply network, they’ll have to buy their own sites.

“However, the opportunity for them to do it in any significant scale is limited. If you strip it back to pure supply and demand, demand for sites remains extremely high, irrespective of who the buyers are. The only potential constraints I see on that pool of buyers – looking at independents – is the ability to raise money. If the banks suddenly pulled their horns in because of a recession, that reduces the ability of people to borrow and therefore buy. But there’s nothing like that on the horizon at the moment. Despite the uncertainty of Brexit, - and this week’s votes which seemed to have bounced the stock market up - there seems to be a lot of confidence around.

“If the oil companies add to the pool of buyers and even replace one or two of the larger independent dealers that will continue to stoke the fire.“

Christie & Co brought Cornwall Garage Group to the market in the autumn of 2018 and this has been a good market bellwether, according to Rodell. “Interested buyers included both domestic operators of all sizes and overseas investors seeking a foothold in the UK,” he said.

And while forecourt property prices softened last year following the MFG/MRH deal, they did not fall as many in the market predicted. In addition to the group deals, there were 50-60 individual forecourt transactions throughout the year, and indications are for a generally positive market outlook in 2019, according to Rodell.

“Margins look set to improve for fuel retailers,” he said. “Following consistent crude oil price growth since January 2016 after a period of industry oversupply and pump-price discounting by the oil companies, we anticipate that the gap between pump prices and oil prices will again widen, based on crude oil price forecasts for the next few years.”

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Weekly retail fuel prices: 18 November 2019
RegionDieselLPGSuper ULUL
East131.0157.70138.30126.81
East Midlands130.59139.47126.61
London131.00140.06127.56
North East129.23139.06125.25
North West129.8364.92138.07126.36
Northern Ireland127.82133.40124.44
Scotland130.4852.70137.39126.25
South East131.4769.90139.42127.48
South West130.5064.90136.17126.41
Wales129.68135.94125.44
West Midlands130.33140.40126.46
Yorkshire & Humber129.8099.90138.58126.25

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