Investors continue to fill up on service stations as sector ‘runs hot’

Investors are filling up on service stations as fuel and retail convenience assets remain in hot demand during the coronavirus pandemic.

Six Woolworths Caltex-branded fuel and convenience assets were sold individually under the hammer for a total of $40.235 million in Cushman & Wakefield’s latest national commercial portfolio auction, with a seventh service station under negotiation.

Cushman & Wakefield head of national investment sales Michael Collins said there was a large number of active bidders amid strong interest in the portfolio, which also included retail, childcare and medical assets.

“The sale of six sites within the Woolworths Caltex-branded portfolio is further evidence that the fuel and retail convenience sector continues to run hot,” Mr Collins said.

“Private and high-net-worth investors have continued their active search for yield during the pandemic and are targeting defensive investment opportunities backed by high quality, long-term leases.”

Eleven commercial properties sold for a combined $53.59 million in what Cushman & Wakefield said was the largest national portfolio auction held in Sydney this year, achieving a 73% clearance rate.

Mr Collins said most of the assets sold for well above reserve.

“Overall, investors sent an overwhelming signal about their confidence in the alternative real estate investment market,” he said.

Fuel and convenience assets remain popular with investors. Picture: realcommercial.com.au/sold

The properties, mainly located in New South Wales and Queensland, were sold to private and high-net-worth investors from local areas and interstate as well as two funds management groups.

Cushman & Wakefield said the portfolio attracted more than 950 pre-auction inquiries.

The Burwood Woolworths Caltex service station in inner Sydney sold for $8.9 million at what Cushman & Wakefield said was a near-record 3.71% yield, while two retail properties in the northern Sydney suburb of Freshwater recorded yields of 4.11% and 4.28%.

“The low yields recorded across many sites reinforced the yield compression we are seeing among these types of assets and are reflective of the lower-for-longer interest rate environment,” Mr Collins said.

“In particular, the market for fuel and convenience retail property has been among the best-performing alternative asset classes, with values remaining highly robust throughout the pandemic.”

There has been strong demand for service stations during the pandemic, with unfulfilled pre-coronavirus demand continuing to fuel the sector.

Six of the 21 properties listed for sale at Burgess Rawson’s final portfolio auction event of the year are service stations, with the asset class continuing to experience significant turnover as both vendors and buyers take advantage of strong trading conditions.

Burgess Rawson director Raoul Holderhead said 56 underbidders missed out on fuel retail properties in the agency’s October portfolio auction, with many of them expected to make a play for the next available opportunities.

The Woolworths Caltex service stations in the Cushman & Wakefield portfolio, located in NSW, Queensland and the Northern Territory, were all sold with newly-signed 15-year leases.

The firm said the sale prices ranged from $3.84 million for the Townsville service station to $9.1 million for the Chatswood site, with yields in Sydney from 3.71%, 4.41% in Byron Bay, 5.96% in Brisbane and 6.25% in Townsville.

The broader portfolio included a range of retail, food and healthcare assets in Queensland and NSW, while two Brisbane-based childcare centres sold prior to auction.