Location, location, location
Service stations are so hot right now!
Back in the 1970s, many Australians lived in the suburbs and commuted to work in their car, and there were around 25,000 service stations pumping petrol on virtually every major intersection.
To put that into context, Australia had a population of around 13 million in 1973 so that’s one service station for every 520 people – half of whom were probably too young to drive or didn’t own a car!
Today there are around 6,500 petrol stations and as the most recent transaction shows, (BP paid Woolworths almost $1.8 billion for 527 sites in December 2016) they are very hot property.
Recent industry consolidation has seen Viva Energy, BP and Caltex fight it out for the prime sites and many smaller family or independent operators cashing out. Having been involved in the environmental due diligence for many of these sites we know this current spate of acquisitions hasn’t finished yet.
Meanwhile, the demand side is evolving too. Modern vehicles continue to become more fuel efficient, as evidenced by government fuel duty revenue tracking downwards. The types of fuels used by vehicles are changing too, as ownership of hybrid and electric vehicles grows.
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That’s for those people who own a car, many Millennials are shunning personal car ownership entirely and relying on a blend of public transport, car share, ride hailing services like uber.
Earlier this year, AECOM’s Transport on Demand report predicted that every car share vehicle in Sydney could take up to 10 private vehicles off the road by 2036.
So in the face of that changing demand curve and the fall in private car ownership, why are urban service stations such hot property?
If you consider the sites as part of a national retail network their real value comes down to the age old property mantra; location, location, location!
The real future value is not the fuel they provide, although they will continue to offer that in some form for at least the next 20-30 years – it is their strategically significant locations.
A service station is a relatively large, well connected site, positioned in an urban location close to people, homes and businesses.
Whether or not the stations will be pumping petrol, LPG, or rapid charging electric vehicles (EVs), the future of these sites will be a blend of food, retail and convenience, as they look to broaden and deepen their offer to create a one-stop shop for customers.
Beyond convenience offerings, perhaps there is a bigger opportunity for these locations to be key enablers for the 4th industrial revolution.
Could they be the hyper connected co-working spaces or maker spaces of the future?
How long until they offer the community access to large format 3D printing/manufacturing on site?
We think now is the time to look beyond the current horizon and consider a far more radical future for these sites.
Hydrocarbon fuels will continue to rule
Despite the predicted uptake of EVs, Australian petroleum majors are expecting limited impact on traditional hydrocarbon fuel sales in the next 10 years. A large proportion of Australian cars in this timeframe will still be hydrocarbon fuel powered and will require filling-up – therefore most of these sites will still have hydrocarbon fuels stored at them.
For this reason, we think the following is a realistic time line:
Next 1-2 years:
Start contemplating community hub elements (eg. communal work/networking/meeting spaces) in addition to retail and premium food offerings.
3+ years:
An increased number of diversified service station sites, presence of electric charging stations at majority of urban sites – driven by improvement in battery technology which will enable rapid charging. The storage and sale of hydrocarbon fuels at these sites remains a key feature.
10+years:
The balance of fuel will now favour electric and other lower emission options, changing the hazard profile of service station sites, thereby enabling “higher” uses to be contemplated on the site.
20+years
These sites could also offer a cumulative benefit that connected EV batteries provide to a more resilient electricity grid. A typical service station footprint could house 50 automated e-cars with battery capacity of 20kW stored in a robotic stacker, multiplied over just half of the 600 sites across Sydney, this could store 6GW of energy. Currently, the entire state of NSW only has 16GW of installed generation capacity.
Authors
Ashley Lang, Market Sector Director, Oil & Gas – Australia New Zealand
James Rosenwax, Executive Director, AECOM Cities, Australia & New Zealand
