Anyone who has been in the service station industry for a significant period of change will tell you that the nature of the physical service station network is constantly changing. Such changes range from acquisition of major national networks such as Chevron’s recent acquisition of Puma energy, changes in the commercial arrangements between Viva Energy and Coles relating to the operation of Shell branded servos, significant growth of mid-sized independent brands like Metro Petroleum, or the growth of family-owned retail businesses like APCO and Rampage.
In recent months, ACAPMA has received member and media inquiry about an apparent increase in service station lease and sale activity. Much of the media inquiry has centred around the possible reasons for this inquiry with media asking whether the increase is as a result of fuel retail businesses struggling in the aftermath of the Covid-19 downturn and higher electricity prices, or an indication that some fuel retailers are opting to exit the market in advance of the likely growth of electric vehicles over the next decade.
Needless to say, ACAPMA’s response to these media inquiries has been to suggest that there are a multiplicity of factors that are likely contributing to the increased activity, but the growth trajectory of EVs is NOT one of them, said ACAPMA CEO Mark McKenzie.
“In fact, our industry is perfectly placed to support the likely significant national requirement for supervised ultra-fast vehicle charging services as more and more electric vehicles come online and EV owners demand charging services beyond their own home”, added Mark.
Apart from the fact that Covid-19 has hit some fuel retail businesses hard by depleting cash reserves, fuel margins have been somewhat challenging over the past 10 months. This, coupled with the fact that some operators, particularly family-owned businesses, are of retirement age could simply mean that some businesses are choosing to exit the industry.
But equally, it would be fair to say that we our industry is entering an exciting time of change where renewed consumer interest in our convenience offerings and the desire to diversify service station forecourts to accommodate EVs (and to a lesser extent Hydrogen) is causing many people to reconsider the physical footprint of their sites.
“So, in short, we see the increased leasing activity as a sign of a dynamic and buoyant industry where new and existing players are positioning their businesses for the future”, said Mark.
Within this context, making informed business lease decisions is a growing and increasingly important requirement for fuel retailers. Such decisions require consideration of two primary factors, namely: (a) examination of past trading performance, and (b) ensuring that your overall lease costs are competitive.
Assessing past trading performance is generally straightforward and there are an increasing number of sophisticated information services that are available to assist with the assessment of the site’s past trading performance, relative to local competition.
“But determining whether you are paying a fair rental over the period of the lease is quite challenging and requires a knowledge of lease history in the vicinity of site under consideration”, said Mark.
“While the larger corporate networks have very sophisticated tools to support the assessment of lease costs, such tools for mid cap and smaller fuel retail businesses don’t exist – at least not until recently”, added Mark.
ACAPMA has been made aware of a product called LeaseInfo which is being marketed by an Australian-owned company called FLNT. The tool has been successfully leveraged for general retail businesses for some time with great success.
“Over the 11 years that I was the Australian Retailers Association Executive Director, we worked with LeaseInfo on bringing transparency around retail leasing to the retail industry, making good quality data available. In states where data was available, we saw significant transparency in retail leases”, said former ARA CEO Russell Zimmerman.
“In fact, the product was so good that I recently chose to join their team to help promote the product into other industries”, Russell added.
In recent months, the FLNT team has developed Leaseinfo for fuel retail businesses. LeaseInfo (Fuel Retail) provides accurate, timely and independent leasing data from one-off reports to a full-suite subscription service. By expertly gathering and analysing thousands of detailed data sources, it maintains an unparalleled lease database that can be used to draw out the precise information about a given lease – and allow comparisons with nearby leases in the same market.
“LeaseInfo (Fuel Retail), is a unique data set that has been curated specifically for the fuel leasing sector with extensive consultation with industry experts”, said Simon Fonteyn (Founder of LeaseInfo).
Given the considerable leasing activity within the industry, and the growing level of member inquiry, ACAPMA is working with the FLNT team to promote industry awareness of the product.
Further information about the product can be found by visiting FLNT – Powering greater certainty and contacting the team to organise a no obligation demonstration of the tool.
ACAPMA
Source: https://acapmag.com.au/2022/10/leasing-activity-on-the-rise/.
