Press Release
Car Dealerships, Drive Thrus, Petrol Stations and Self Storage most sought after alternative assets says Rapleys
Car Dealerships, Drive Thrus, Petrol Stations and Self Storage most sought after alternative assets says Rapleys
6th Jun 2024
– Huge opportunities to be found in Automotive, Roadside and Storage;
– Investors seeking niche assets to diversify portfolio;
– Growth fuelled by constricted supply and increasing demand as consumer habits changed post-Covid.
UK, MAY 2024 – Investors looking to diversify portfolios and seek opportunities to add income and value are increasingly turning to niche assets, leading Alternatives real estate adviser Rapleys says, with Car Dealerships, Drive Thru property, Petrol Stations and Self-Storage units top of the list.
The property consultancy’s Alternative Assets report (An Alternatives View) assessed performance, outlook, challenges and opportunities with themes and trends that traverse across 16 niche sectors including Automotive, Roadside & Self Storage.
Over the last three years, alternatives have often outperformed traditional/core industries with investors spotting huge potential to diversify their portfolios and realise value. Of the sectors, the four assets (Car Dealerships, Drive Thrus, Petrol Stations and Self-Storage) within Automotive & Roadside performed best, with both Drive Thrus and Self-Storage set for continued strong performance.
New manufacturers from Asia and in particular China, have driven demand for car dealerships, mainly through dealer relationships, and in spite of a drop off in the used car market with some divesting from used car initiatives entirely including Pendragon (Car Store). For petrol stations, fuel margins in 2023 were at a 20 year high and together with strong demand for this type of asset from a wide array of investors (including Asda’s owners who bought the Coop forecourt/convenience portfolio) meant that strong capital values, land values and rental growth was seen. Drive Thrus saw some sites command £60per sq ft no doubt buoyed by the proportion of restaurant sales achieved via Drive Thru outlets rising by 50% post Covid and the entrance of new brands like Gails and Leon opening up the market to a more diverse array of customers; while the Self-Storage market broke through the £1bn barrier by the end of 2023.
Daniel Cook, Partner and Head of Automotive & Roadside at Rapleys, said: “In 2024, Alternative assets represent a large part of real estate transactions and our report highlights the opportunities and challenges for assets that investors are increasingly interested in, despite most not having much experience, and where developers can add real value, occupiers need expert real estate advice and Local Authorities can build up more knowledge. Some of these assets have seen a spike post Covid where preferences and consumer habits have changed – such as Drive Thrus which have benefited from increased demand for a ‘contactless experience’ and Self-Storage where people want to maximise their living quarters more or make way for home offices.
“However, niche assets come with niche risks and challenges. Investors also need to be aware of how to tackle these, in order to gain competitive advantage. Car Dealerships and Petrol Stations in particular face challenges including the evolution of EVs which pose conversion cost conundrums and weight issues, net zero target compliance despite bespoke cooling and lighting requirements and rising build material costs that may threaten viability of development. That’s why expert guidance to determine how to make the most of genuine opportunities and sidestep potential obstacles in these niche areas is crucial.”
One of the biggest obstacles to growth in Automotive & Roadside is supply. With investors lined up to acquire the best sites and assets, the report highlights that ready-made property in this sector is hard to come by, with Rapleys reporting up to 100 ‘buy’ calls for every one ‘sales’ call for petrol stations alone. A potential lack of understanding and experience in the sector means that investors aren’t necessarily comfortable with, or think about, assets in other sectors that may be possible to convert for Automotive & Roadside use or are nervous about the support of Local Authorities when it comes to obtaining the required change in planning consent.
Cook adds: “With the right advice, investors will gain competitive advantage by being able to see what’s possible including looking at other sectors in order to release opportunities to convert sites or repurpose existing buildings into Alternatives such as Car Dealerships, Self-Storage and Drive Thrus. That’s part of the reason Rapleys has gathered these niche assets together – to raise awareness and highlight our deep understanding and insight of properties that some people won’t have ever before considered as real estate investment or development opportunities.”
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