Investors’ appetite for petrol filling stations and convenience stores remains very strong, according to the latest report from property adviser, Christie & Co.
Its report, UK Alternatives Investment Index: H1 2019, provides an overview of currently achievable yields on prime and secondary investments across various subsectors. The report finds that the average yield on prime investments across UK alternatives as a whole ranged from 3.5% to 7.5%.
Prime investments in the petrol filling station sector showed much greater compression compared with the average, with 5% to 5.5%, while secondary investment yields demonstrated a slightly greater spread ranging from 6.5% to 9%.
Generally, investors in this space look for long-lease investments of around 20 to 25 years and strong covenants. As supply of these high quality, attractive assets is limited, and there is good availability of debt finance at competitive levels, Christie & Co anticipates the yields for these prime investments to remain stable.
The convenience retail sector demonstrates yields of 4.5% to 4.9% for prime investments and 5.5% to 7.5% for secondary investments. As investors have moved away from high street retail towards food retail, Christie & Co identifies convenience store and smaller format supermarkets as the more resilient and attractive investments.
Smaller funds, private investors and family offices are seen to be the most active in this space particularly for lot sizes below £1.5m and Christie & Co notes that this is likely to be the case throughout 2019.
Steve Rodell, managing director – retail at Christie & Co, commented: “The market for convenience retail investments is well established and will remain buoyant against fading interest in high street occupiers. Petrol stations also remain in demand despite some concerns over their long-term viability in the face of alternative fuels. Occupier demand speaks volumes in the other direction and well-located roadside retails sites will always hold strong underlying residual value.”