Sales of c-store and gas station properties were relatively strong last year, according to the first half 2009 single-tenant retail report from Marcus & Millichap Research Services, GlobeSt.com reported.
Last year, rising average cap rates for the property niche reached their highest since 2002, and is credited with fueling an increase in transactions.
“In 2008, sales velocity…surpassed the levels recorded in the prior year, as investors were attracted to the sector’s cap rates, which increased roughly 80 basis points in that time to the low-8% range,” the report from Marcus & Millichap Research Services stated. “As profitability among operators continues to accelerate, these properties will likely remain a preferred choice among investors.”
Nonetheless, sales transactions slowed toward the end of last year and have yet to grow significantly in 2009, Steve Horn, senior vice president of acquisitions for Orlando-based National Retail Properties Inc., told GlobeSt.com. Meanwhile, cap rates are moving in the opposite direction, edging upward in the c-store industry.
Horn noted that c-stores typically have very solid real estate, and that the relatively small individual property price means you can easily gain diversification with multiple purchases.
“We’re actively looking at acquisitions in all [retail] industries, but we’re particularly interested in convenience stores and movie theaters,” Horn told GlobeSt.com. He added that more modern c-store formats that have expanded capability for foodservice are most desirable today, because higher margin food service means the tenant has a greater ability to afford rent.
At the end of 2008, there were more than 144,000 convenience stores in the U.S., according to the NACS, the Association for Convenience and Petroleum Retailing, a 1% decline from the country’s 2007 c-store count. While single-store store operators accounted for 62% of the industry, they also represented the majority of last year’s decline in the overall number of c-stores operating in the country, according to the NACS.