Will the Road to Zero impact the value of my PFS business, was the title of the presentation at Summit 2020 delivered by Steve Rodell, managing director – retail at Christie & Co.
“If you thought Brexit was taxing then try deciding when the onset of alternative fuels will have an impact on the value of PFS – when the Road to Zero could bite,” Rodell said.
He explained that last year Christie & Co advised on around 5,000 retail businesses which included around 900 PFS and sold around 60. “In January we launched our Business Outlook and I made a statement in there that PFS will remain relevant for the foreseeable future because that’s the sentiment I was getting from the marketplace and, from everything I have read, that’s what I believe.”
First, however, in order to address the title of his presentation he said you have to look at what affects value. He explained that there are only two variables: income from operation or income from rent and ultimately the value is based on the security of the income to that site.
He said the only factor at risk is to a forecourt’s fuel sales. “I don’t think anyone can deny that the world is changing and fuel sales will eventually dip – well certainly diesel sales – but sales have trundled along very steadily over the last few years and will probably continue to trundle along for the next 10 or 20 years. So that’s why I say that despite the Road to Zero, PFS will remain relevant for the foreseeable future.
Even if fuel does tail off in the long run, people have still got a load of reasons to visit a PFS’s retail facility such as the convenience and food to go offer.
“There is already a pathway to replace any profits you may lose from fuel,” he said. “Plus there’s a massive opportunity to take back the valeting business that has been lost to hand car washes.”
Rodell then looked into his crystal ball to see what might drive value in 2035.
Fifteen years from now he described the following scenarios:
• UK fuel volumes will have tailed off in selective locations with high EV take-up. Sites in these locations – perhaps where ICEs have been banned – have seen fuel sales fall dramatically but increased convenience and foodservice sales. Pumps may have been replaced with greater retail space and parking. Or where supply permits, fully converted to EV charging due to the high density of EV ownership, perhaps where people live in flats, probably converted from redundant high street retail units.
• Retailers will have increased petrol pricing to compensate.
• A new network of super-fast EV charging stations has been developed alongside the UK PFS network. They are sited at nodal locations mirroring the National Grid. They have toilets and smart new convenience store/food-to-go offers and could well have been developed at supermarkets, hotels, restaurants and leisure centres.
• Autonomous vehicles will be a reality and so will hydrogen fuel cell EVs – but drivers of EVs still use traditional PFS sites for the retail and valeting offer.
• High alternative use value means a few sites will close for redevelopment –especially in the South East where real estate values are high
• Real estate values have been driven by tech companies such as Amazon and Google who require autonomous vehicle storage facilities near centres of population; distribution depots for last-mile delivery bots; and drone landing space for delivery/collection of orders.
Rodell concluded: “But in all instances the value of a roadside retail property will still be driven by location, property characteristics and trading performance.”