From Fuel Pumps to Retail Hubs: Valuing Australia's Petrol Stations

Author: Joshua Fulton, Director - Specialised & Advisory

In recent years, the petrol station real estate market in Australia has undergone significant transformation, driven by evolving consumer preferences, technological advancements, and regulatory changes. This article delves into the market trends we've seen over the past two decades, and explores the complexity of valuing the evolving petrol station market.

Market Trends: How Australian Petrol Stations Have Transformed

Over the past few decades, the petrol station real estate market in Australia has been influenced by various factors such as fuel prices, consumer behaviour, and regulatory changes. From 2010 to 2020, we've witnessed significant consolidation, and a subsequent rise in sales, as larger operators such as Ampol, Caltex, and 7-Eleven acquired smaller players to expand their market share. For instance, Ampol's acquisition of the Caltex brand in 2020 allowed it to expand its footprint and streamline operations, resulting in enhanced efficiency. This consolidation often leads to the closure of smaller operators who struggle to compete with their scale and resources.

Larger operators achieve efficiency and scale in their infrastructure investments through several strategies. They invest in advanced technology for fuel management and inventory control, reducing operational costs and improves service delivery. Additionally, they leverage economies of scale to negotiate better terms with suppliers, allowing them to offer competitive pricing while maintaining profitability. The integration of EV charging stations into their existing infrastructure is another example of how these operators adapt to market changes, ensuring they remain relevant in a transitioning landscape.

These adaptations have seen larger petrol station operators not only enhance their operational efficiency but also increase the overall value of their real estate assets by approximately 20-30%, making them more attractive to investors.

Preparing for an EV Future: Diversification and Adaptation

While the gradual transition to electric vehicles (EVs) in Australia might be expected to significantly impact the value of petrol station assets, those who adapt by incorporating EV charging stations and shifting towards a "one stop shop", multi-service retail hub model, generally enhance their value by increasing foot traffic and diversifying revenue streams. Stations can now be found offering everything from supermarket retail, restaurant chain food outlets, drive-through liquor, car cleaning and detailing, and even parcel collection and delivery services.

Valuing Petrol Stations in a Dynamic Market

With all the above considered, there are a number of complexities valuers must consider when undertaking petrol station valuations:

1. Location Analysis: Proximity to major roads, urban centres, and competition can significantly affect foot traffic and therefore profitability.
2. Regulatory Environment: Understanding the relevant local zoning laws, environmental regulations, and compliance requirements is crucial. These factors can impact the operational capabilities of the petrol station and its future development potential.
3. Financial Performance: Analysing historical financial data, including fuel sales, convenience store revenue, and ancillary services, helps in forecasting future performance and determining the station's profitability.
4. Physical Condition and Infrastructure: The condition of the petrol station's infrastructure, including fuel tanks, pumps, and convenience store facilities, plays a significant role in valuation. Upgrades or repairs may be necessary to meet current standards and attract customers.
5. Economic Factors: Broader economic conditions, such as fuel prices, consumer spending, and competition from alternative fuel sources, can influence the valuation process.

As of 2021, the Australian petroleum industry was valued at approximately $30 billion, with petrol stations contributing significantly to this figure through fuel sales and ancillary services. As the market evolves with the rise of electric vehicles and the demand for diversified services, petrol stations are transforming into multi-service retail hubs. By adapting to these changes and incorporating innovative strategies, operators can enhance their asset values and remain competitive in a shifting market. Understanding these complexities with the assistance of a specialist property valuation is a great strategy for investors and stakeholders looking to navigate this dynamic industry effectively.

Sources

1. Australian Petroleum Statistics. (2021). Australian Institute of Petroleum.
2. IBISWorld. (2020). Petroleum Retailing in Australia – Market Research Report.
3. Department of Industry, Science, Energy and Resources. (2020). Energy in Australia Report.
4. Australian Bureau of Statistics. (2021). Australian National Accounts: Industry Value Added.
5. CBA (Commonwealth Bank of Australia). (2021). The State of the Australian Economy: A Review of Economic Developments.

Joshua Fulton
Director - Middle Markets & Advisory

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This article is produced by Opteon Property Group Pty Ltd. It is intended to provide general information in summary form on valuation related topics, current at the time of first publication. The contents do not constitute advice and should not be relied upon as such. Formal advice should be sought in particular matters. Opteon’s valuers are qualified, experienced and certified to provide market value valuations of your property. Opteon does not provide accounting, specialist tax or financial advice.

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