Advice and Opinion

Petrol stations: an attractive property investment

Petrol Station

In South Africa, the price of fuel is determined and regulated by the government, which means that a fuel station’s gross profit is essentially fixed. In the absence of price wars, fuel station owners with a captive market are therefore guaranteed business and a solid stream of income.

This is according to Greg Nafte, Co-Director of Nexus Property Group (NPG), who says that service stations continue to be an attractive asset for property investors. “Service stations represent a clear opportunity for property investors to enter the market and generate solid income from running a business as well as owning the property.”

However, Nafte points out that South African service stations tend to be very tightly held. “In light of the solid business opportunity that they possess, these assets are incredibly sought after and do not come to market very often.”

Elias Tzouvanni, Co-Director of Nexus Property Group (NPG), echoes this sentiment, saying that the demand for these properties in recent years has surpassed the market supply. “Between 2010 and 2011, we saw service station properties come to the market with incredible demand – often selling within a few weeks. After the sale of many sites, the market saw supply almost cease”.

“We are therefore very excited to have a property containing a service station within our Corporate Real Estate and Private Clients Service’s portfolio going under hammer,” Tzouvanni adds.

“The seller’s only reason for sale is an opportunity to develop a larger site in another part of the Western Cape. Given the current movements in the South African oil industry, this is an excellent opportunity for an individual to own their own portion of the very lucrative petroleum industry”.

“Situated in Parow, Cape Town, offering excellent exposure and an active residential catchment area, the Shell service station includes multiple retail tenants and workshops. Among these retail tenants is a pet shop, a car wash and other retail stores with a forecourt, altogether bringing in rental income of approximately R610 000 per annum. This is over and above fuel sales of approximately one million litres per year.”

Nafte adds that while this is a fairly low-volume site, pumping on average 90 000 litres per month, the gross profit is fixed and the sales price is guaranteed. “By owning the property, the buyer will also be securing the position and will not be dependent on any terms set by a landlord or oil company that owns the land,” he says.

Tzouvanni concludes that the upcoming auction is already receiving great attention. “The release of this service station to the market and the demand since has been incredible due to a severe shortage of these opportunities where the property and business are available in one sale. The auction will be held at 125 Waterkant Street Green Point on 23 November 2016 at 12h00.”