South West forecourt market "buoyant" with demand outstripping supply
Specialist business property adviser Christie & Co has revealed an increase in demand in the South West forecourt sector for the first half of 2016, with this demand looking set to continue into the second half of the year.
When compared with the same period in 2015, Christie & Co has sold 50 % more forecourts and has seen 75% more forecourts go under offer with most attracting multiple bids.
This strong demand in the region has been driven by a number of factors including private equity groups investing in the sector, fuel margins remaining relatively stable for the last 12 months and the change in consumer spending where forecourts are benefiting from the ‘top up shop’. This trend has increased in the last five years where consumers visit a supermarket once every one to two weeks with the so called ‘top up shop’ filling the gap for essentials.
David Morris, Business Agent at Christie & Co explains, “With the convenience channel set to grow by over 11.5% by 2021 (IGD five year forecast) there is no doubt that forecourts are set to benefit from a slice of this growth and this is also helping to drive interest in the forecourt sector, particularly from existing operators. In addition to this, the forecourt sector is seeing a lot of attention from private equity – not only in the South West, but also across the rest of the UK.”
Christie & Co has also revealed the impact that changing economic conditions are having on the forecourt sector. With an increase in the National Living Wage and changes to employee pension contributions on the horizon, David explains how this will impact on the large numbers of independent operators across the region.
“The South West has a large number of independent owners operating one or two sites and, as costs rise, due to legislative changes, their businesses will not be as profitable. Corporate operators have an advantage in this situation as they will find it easier to absorb this cost, so the effects are not felt so deeply.
“However, on the positive side for those looking to sell in current conditions, forecourt owners in the South West often find that the bricks and mortar value of their business is stronger in comparison with Wales or the Midlands and so provides a safer investment for a potential buyer, thus making businesses in the region more attractive. With many businesses having been held by a private individual or family for many years, they will have had time to build up these businesses to a level that is attractive to the corporate and regional multiple operator and we are seeing that it is currently these buyers who are predominantly looking to purchase.
“That said, first time owners, many with extensive retail experience, are still very active in the market, alongside regional multiples and larger corporate operators.
“Regional multiple and corporate operators are often seeking the freehold interest with leasehold opportunities proving more attractive and often more cost-effective to the first time owner. Creating a new lease has also become a popular alternative as freehold owners look to create an investment without relinquishing their freehold interest in the property.
“It’s fair to say that the South West forecourt market is busy and buoyant, with both buyers and sellers looking to move quickly.”