South Africans use more than 30 billion litres of fuel per year – consumption not only driven by the country’s massive dependence on its road network for passenger transport and freight movement, but increasingly on powering generators to keep commerce and industry alive during load shedding.
This makes service stations and industrial properties zoned for petrol stations or fuel depots among the most lucrative real-estate investments in the country at the moment, according to High Street Auctions director, Greg Dart.
“Industrial property has been the consistent shining light in the commercial sector for several years now, but petrol stations in particular are enjoying renewed interest from investors – not surprising considering the returns offered by this specialised sub-sector of the market.”
Dart says petrol stations in South Africa usually operate within two broad business models.
“The first is a franchise route in which a petroleum company owns the asset, but offers the forecourt management to a franchisee. There’s certainly money to be made as a franchise owner, but it’s not nearly as lucrative as the alternative.
“Option two – that’s of considerably greater interest to real-estate investors – offers higher margins on returns because the property owner also runs the business with a retail license agreement from an oil company.”
Dart says despite the significant profitability of this sector, among the biggest barriers to investors is that it is a very, very long game.
“The land use regulatory framework for petrol-station zoning is eye-watering, so if you’re an investor starting from scratch, it could be several years before you make your first rand – never mind see a return on your investment. Land rezoning for underground chemical storage is slow, detailed and expensive.
“The best way to enter this lucrative market is to buy an existing service station or land that is already zoned for the purpose.”
Dart says three of these prime investments were under the High Street Auctions hammer this month on its auction of 29 lots that covered a spectrum of industrial real estate, retail opportunities, commercial buildings, student accommodation, residential and agricultural properties.
“We saw significant investor interest in the service station on the N12 in Potchefstroom in the North West.
“It’s a very active going concern that pumps around 520,000L of fuel a month catering to the local community and the very busy road freight, long-distance bus- and agriculture industries with its diesel depot and heavy-goods vehicles parking area.
“There isn’t a better location in the North West to own a service station, which sits on 1.9358 hectares, with site improvements of 1 134m².
“The sale included the balance of the 13-year supply agreement with Total Energy. Retailers on site currently comprise a Mugg & Bean Express, the Bonjour convenience store, a small nursery, a car- and trailer-hire company and a cellular-phone shop.
“This is the sort of lucrative petrol station business that offers no delays on delivering cash flow and an immediate opportunity to begin recouping your initial investment.”
Dual-sector commercial-property investment
Dart says the second fuel-station auction opportunity that went under the hammer was in Gauteng, which is by a wide margin the largest petrol consumption market in South Africa.
“This was an opportunity to marry two of the most profitable commercial-property sectors in one massive 32.9ha site right next to the bustling Mnandi Mall on Maunde Street in Atteridgeville, of which 14ha is available for development.
“The site – easily large enough to build another mall – is zoned for retail, industrial and for a petrol station. This means all the legislative heavy lifting has already been done in terms of the fuel-station feasibility and the environmental-impact assessment plans. There is already an offer to lease on the industrial site by a national building-materials retailer.”
Dart says the other fuel-site development opportunity auctioned is located in Stilfontein on the N12, the busy arterial between Klerksdorp and Potchefstroom in the North West.
“This 19.2394ha property used to be a busy service station pumping between 500,000L and 700,000L a month, which indicates the potential for the new owner.
“It is zoned for a fuel station and was just waiting for an enterprising investor to rehabilitate the infrastructure and secure a fuel retail license agreement.”
High Street has two auctions in November. On the 23rd look out for a bumper City of Cape Town land disposal auction, followed by a multi-property auction at the Bryanston Country Club on November 30. For details of all the lots on offer, visit www.highstreetauctions.com.
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