Investor Service Station Activity Declines
A tighter lending environment, reduced yields and lack of stock have put the brakes on investor activity for service station assets in metropolitan and regional areas of Queensland, according to Ray White Commercial.
Ray White Commercial Head of Research, Vanessa Rader, said service station assets have in recent years been highly sought after by investors due to their strong lease covenants and future redevelopment potential.
Vanessa Rader said there had been lower investor activity in the service station market in Queensland over the past two years but not because of reduced appetite for these assets.
“This reduction in activity has been due to lack of quality stock available to the market rather than demand to purchase with the downward trend moving into 2017,” Vanessa Rader said in the Between the Lines – Queensland Service Stations June 2017 report.
“There have been very limited transactions (in Queensland) in the first five months of 2017 with only $43.35 million recorded.
“While buyer demand remains high, the continued reduction of yields may have seen this asset now seem out of reach for many investors. This has also been exacerbated by tightening lending conditions, putting further pressure on this pool of investors.”
Ray White Commercial Queensland Director of Sales, John Dwyer, said investment yields have seen considerable movement over the last 10 years with the peak in yield achieved during 2010 before showing sharp declines which continued through to 2017.
“Yields for regional and South East Queensland locations have now come together as investment has become more price point driven with the most active, low yielding assets being in the sub $2.5 million range,” he said.
“While investors continue to seek new investment options with secure income streams, the appeal of service stations may be starting to wane.
“Banks have now imposed some restrictions on this asset class and as yields now have reached significant lows, investors are now being more considered with their investment options.”