Bouyancy in the forecourt property market is likely to continue well into 2018, although a market peak at some point in the year would not be surprising, according to Steve Rodell, managing director – retail, at Christie & Co, which has just published its annual Business Outlook report.
Following an extremely successful year in which the specialist business property adviser was involved in the transactions of around half of the 160 forecourts sold in the past year, Rodell said that forecourts with healthy fuel margins and growing convenience operations would see the trend for strong market prices continue well into 2018.
“There is such a plethora of issues that affect the potential for there to be a significant increase in alternatively-fuelled vehicles in the next 10-15 years, that there’s no immediate impact on transactions that are currently going on in the market,” said Rodell.
“However, it wouldn’t surprise me if we saw peak forecourt property prices this year. The momentum as far as alternative fuel/electric vehicles is concerned is gathering pace. While we’re a long way from having the infrastructure to support those vehicles, everything is pointing to government, car manufacturers and even consumers heading in that direction.
“But my big bold caveat is – if profits on a forecourt don’t fall, nor does the value. How that profit is made up will be very interesting to see over the next 10 years or so. If fuel volumes reduce because people are driving more efficient cars, retailers need to think about how they replace that lost fuel margin. That’s why more retailers, particularly the big groups, are developing their offers, such as in food to go.”
According to the latest Christie & Co report, despite the company selling 29% more businesses in the past year across the retail sector, average property prices were down 0.4%. Rodell explained it was due to the sale of a lot of low-value, standalone leasehold newsagents and convenience stores, which dragged the overall figure down.
“There are two stories here. In isolation in forecourts, we saw around a mid-teens increase in the average price achieved. We definitely sold more single, high-volume, high-turnover sites,” he said. “It’s been a very busy year dominated to a degree by some group deals, but also for us a there’s been a big demand for high-quality sites as well. The big guys were very selective about single sites and picked off the best ones.
“Their activity and all the other people in the market for those sites drove up the prices. I don’t see too many hurdles to that continuing.”
But while independent operators own 68% of petrol stations in the UK, Rodell said supermarkets remain the largest operators in terms of volume. “Major grocers are expected to continue expansion through franchising and supplying the wider independent convenience sector, as they combat the ceaseless rise of Aldi and Lidl,” he said.
In their Business Outlook 2018 report, Christie & Co identifies the sectors that benefitted from activity fuelled, in part, by the availability of finance and a surge of investors, many from outside the UK, looking for good opportunities and strong returns.
Chris Day, Global managing director at Christie & Co said: “We are seeing the signs of increasing confidence and economic positivity in almost every sector in which we operate and pipelines continue to grow by double digits as we enter 2018.
“While higher inflation and sluggish wage growth are squeezing consumer spending and acting as a drag on the speed of UK growth, and a lack of clarity around Brexit is hampering some investment, but there are positives. Unemployment is at its lowest rate since 1975, inflation remains low, interest rates are stable and manufacturing growth is strengthening. In short, the economy is recovering and there is still plenty of room for growth.”