Retailers see profits in petrol forecourts

PETROL station forecourts are attracting the attention of retailers as they continue to battle it out for market share and add to their outlets.

Spar has been cited as contender for the title of leading operator on the forecourt but Tesco, Marks & Spencer, Sainsbury's and Waitrose are among those that have also moved in or are said to be considering doing so.

One senior Scottish banker, who majors in commercial property investment, said: "It is a whole new area which has blossomed. These forecourts used to be driven by petrol sales but petrol is now a loss-leader.

"It is all about cash flow, location, the quality of management and the number of people calling in. The sale of petrol, cigarettes and a few sweeties are not enough these days, and if they get it right the rewards can be high."

Tom Johnston, head of retail in Scotland at Colliers CRE, confirms that forecourts are more and more in demand by retailers looking for outlets.

He says: "They are convenience stores, some open all night, with impulse buying when people pay for their fuel and some are now offering heated meals."

Johnston adds that a motorway service area in Newton Mearns is being put out to tender and will contain a requirement for forecourt retail. A Sainsbury's outlet is also planned for a Shell forecourt in Woodlands Road in Glasgow.

Agent Christie & Co is particularly busy in what it calls "fuelling forecourt sales".

David Higgins, Edinburgh-based retail agent, says Christie is advising on more forecourt transactions than ever before, with a number of significant disposals and valuation assignments recently completed and ongoing.

He says: "We have continued to see a significant rise in the number of new and independent retailers keen to gain a foothold in the market place. These include a plethora of experienced convenience retailers, looking to expand and develop their presence in densely populated locations."

Higgins says many independents have opted to join a "symbol group" operator - a group that sells services to stores that then work under its banner - to maximise sales. He says: "Spar continues to emerge as the UK's leading symbol group operator on the forecourt and the company is aggressively pursuing this market by offering a tailor-made package for forecourt operators.

"Many of the other symbol groups have developed strategies to try to expand into the sector and it will be interesting to see their development throughout the remainder of the year."

He adds that in addition to the symbol groups vying for profile in the forecourt sector, a number of significant convenience retailers such as the Co-op Group, United Co-operatives and Somerfield, as well as the large supermarkets, are keen develop their presence on the forecourt.

Higgins says: "There are a number of sites which offer excellent opportunities for conversion or redevelopment and will be sold for alternative, non-fuel use. With improvements in site remediation and the possibility of overcoming any possible environmental issues, these sites are rapidly acquired by property developers looking to build flats, houses, retail or industrial units.

"Interestingly, the preferred redevelopment route of many planning authorities is for residential use, with convenience retailing being much lower down the list. Many operators have significantly increased the size of their estates over the last year, partly by taking franchise agreements with the oil companies. The oil companies continue to move towards three to seven-year franchise arrangements, elongating their divestment process to ensure that they retain their fuel market share for a sustained period."

KILMARTIN FORWARD-FUNDS OFFICE DEVELOPMENT

THE Kilmartin Property Group has forward-funded to Oppenheim Investment Funds a proposed office development for Edinburgh that has just received planning consent. The 66,000sq ft Grade A development in Leith Street - next to the Calton Square office project - is being forward-funded to the tune of 32 million, which will increase depending on letting success. Kilmarton was chosen by Edinburgh City Council as developer after strong competition to acquire the site. The development will be completed by mid-2009. Oppenhiem was represented by Jones Lang LaSalle, with Kilmartin unrepresented.

NISSAN UK has paid 4.3m (net initial yield just under 5 per cent) for three prime retail units totalling 7,140sq ft in High Street, Ayr. The properties bring in annual rent of 225,500 from three tenants, Country Casuals, H3G and Thorntons, with reviews due in 2007, 2008 and 2010. The leases have an average unexpired term of 11 years. Drivers Jonas advised Nissan.

WG MITCHELL and AWG have paid Highcross 11.3m (a 7.03 per cent yield) for the two-storey 61,000sq ft Excel Centre on Exploration Drive in Aberdeen. Knight Frank Edinburgh and Ryden represented Highcross while Lambert Smith Hampton advised WG Mitchell and AWG.

TWO deals at Langlands Business Park in East Kilbride on behalf of Henderson Global Investors: a 6,917sq ft unit leased to United Co-operative, trading as Sunwin, at an annual rental of 36,314 (5.25 per sq ft) for nine years, and a 2,308sq ft unit to Full Shot Clothing for storage and distribution at 12,117 a year (5.25 per sq ft) for five years. King Sturge and Drivers Jonas advised Henderson, with United Co-operative self-represented and Innes Lambert for Full Shot.

RYDEN has let 22 Walker Street, Edinburgh, to accountants Bryce Wilson & Co. Ryden acted for a private client in the letting, which was secured at 10,000 a year for the 712sq ft office. Bryce Wilson was self-represented.

DR NEWITT & Associates has taken a new sub-lease on 2,944sq ft of offices at 37 Melville Street, Edinburgh, from The Premier Property Group. The annual rental is 46,550 and an incentive of eight months rent free was provided. Premier was represented by King Sturge, D R Newitt by Eric Young.

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