Since the market hit its nadir in 2011, values have shot up 62%, and last year jumped 9%, so a site worth £750,000 six years ago could fetch £1.2m today.
Barber Wadlow director Adam Wadlow says one of the main reasons for the sustained growth is the emergence of private-equity-backed operators, who are attracted to the sector by the strong cashflows and potential to grow profits, typically by expanding and improving the retail offer.
“C-store and food-to-go retail standards are being raised through the use of brands including Sainsbury’s, Morrisons, Greggs, Subway, Costa and Starbucks, among others,” he says.
In 2016, relatively few forecourts changed hands, at 200 operational sites – 86% down year on year. One of the most notable transactions was by Gerald Ronson’s Rontec, which scooped up a portfolio of 40 sites from The Co-op.
Lack of supply, rather than lack of demand, was largely to blame for the sharp fall. “The oil company divestment programmes have largely been completed, ending nearly two decades of supply,” explains Wadlow.
The bulk of the forecourt market is made up of owner-operators. However, following a number of sale-and-leaseback deals, there is a small investment market that has proved attractive recently because of the long leases on offer and the strong financial status of the tenants.
Last year, there were £54m worth of deals, down 49% on the previous year, while prime yields held steady at 5%. Wadlow says yields could slip below 5% this year as investor demand for long-income property continues to grow.
“A lot of investors are struggling to find such stock and are now actively pursuing the sector. It is possible that we will see further yield compression for the prime assets,” he says.