13.07.2009

Continued demand for petrol filling station investments

Petrol filling stations continued to attract strong interest at Allsop's July 2009 auction.

• Somerfield-let sites (guaranteed by Co-Op) achieved 6.6% - 7.3% NIY.

• Ground lease investments let to Shell achieved yields from 4.5% - 6.5% NIY.

Whilst the prices for certain lots were not quite as strong as we have seen over the last two months, the sector does appear to be generating a sustained level of interest. This is unsurprising given the quality of assets, strong covenants, guaranteed rental growth and long-term leases available.

By comparison to other sectors, forecourt investments offer good value, with the average retail investment yield achieving 6.5% NIY and bank investment yields achieving 5.4% NIY (at the recent Allsop sale).

The UK petrol retail network is emerging from a period of significant consolidation - nearly 1 in 3 sites have closed since the Millennium. There are now just over 9,000 forecourts in the UK, a large proportion of which are sophisticated and highly profitable developments. The trading performance of the network is also protected by the difficulties in increasing site numbers because of the protracted procurement, development and planning processes (only 24 new-build sites in 2008 / 2009), which helps sustain residual values.

If you would like to learn more about the sector and potential investment opportunities, please feel free to contact either Adam Wadlow or Amanda Barber, or alternatively, call us on 0121 321 4527.