Light shines on convenience retail
Toorak Road 7-Eleven: Driving wealth
The alliance of fuel and convenience has created one of the best performing property investments.
Convenience Retail is a hot topic and continues to attract investors seeking long-term leases to strong tenants, in irreplaceable sites.
Fuel and food: a convenient partnership
Despite perceived headwinds, there were 103 new convenience retail sites built in 2022. 7-Eleven opened 22 new sites whilst BP opened 54. This clearly demonstrates that convenience retail has a strong future in the Australian landscape.
Whilst EV cars have had an uptick in sales, there are only 83,000 on Australian roads, as compared to 21,000,000 fuel cars and that will continue to drive the need. The tenants are sought after because of their strong balance sheets, for example; Viva’s EBITDA was up 122% in 2022 to $1.1B.
Viva Energy is a fuel heavy weight, owner of Shell service stations in Australia. They recently announced their plan to buy the Coles network of convenience stores on their sites, giving them a bigger retail footprint and ramping up customer engagement. Burgess Rawson, Partner Jamie Perlinger commented this strategy gives Viva Energy exposure to the fast-growing convenience segment through full ownership.
“Combining essential services such as fuel and convenience can secure an exceptional investment opportunity that offers secure long leases and top-tier tenants. This represents a set-and-forget freehold investment with guaranteed rental growth,” he said.
Despite perceived challenges, fuel and convenience retail assets have remained resilient and in fact, top global companies such as Ampol are also partnering with leading EV businesses and adopting a progressive approach to future outcomes.
“These properties are malleable and value-adding due to their locations, so have been highly contested at our auctions. Further, several of these companies recorded strong profits over the 2022 year with Ampol’s net profit after tax, for instance at $732.3 million compared with $297.8 million profit on the previous year.”
Mr. Perlinger said convenience retailing assets are home to the most innovative tenants who have capitalised on their strategic sites by offering one-stop, recession-proof shops.
“The result of their success is evidenced by our recent sale at our last Portfolio Auction which saw a 7-Eleven asset in Killara, NSW sold for $7.5 million reflecting a yield of just 3.96%.
“This was an exceptional result in light of rising interest rates and a fall in retail trading and demonstrates yet again what a stable and strong performing asset retail convenience is,” he said. Portfolio 159 will feature a limited number of these prized assets including a 7-Eleven in Jamisontown, NSW, another in Hawthorn East VIC, and a combined 7-Eleven/Autopro in Colac, regional VIC.
Mr. Perlinger said that increased enquiries are showing that confidence is coming back across the board.
“As market leaders, we’ve seen demand continue to grow with Burgess Rawson selling almost $220 million in these assets over 2022 compared to five years ago when we sold $166 million.”
Other deals across the eastern seaboard are showing firm yields with a 7-Eleven store in East Brisbane QLD, selling for $7.12 million reflecting a yield of 4.91% while a United Petroleum fuel outlet in Altona North VIC, sold for $8.62 million, showing a yield of 5.04%. An EG site in Lisarow NSW, sold on a return of 3.95%.
“With such solid indicators, fuel and convenience retail is a wise investment choice for those looking to secure their financial future,” he said.