High land values last straw for squeezed small petrol stations

Antony Lawes
January 6, 2014
The Age
Soaring land values in Sydney’s inner suburbs are contributing to the disappearance of small petrol stations, industry experts say.
Stiff competition from the bigger players such as Woolworths and Coles, together with the cost of adhering to strict environmental regulations, are squeezing the profits of many smaller operators. But the value of sites is encouraging many of them to sell, often to property developers.
There are few figures on how many of these smaller petrol stations are disappearing, but a senior manager with the Service Station Association, Colin Long, said it was happening predominantly in areas where land was at a premium. In other parts of the city, big-brand service stations were keenly sought as high-quality investments.
“Land value is certainly an issue because you’ve got low-rise service stations on blocks which can be built with high-rise developments,” he said.
One of these is the former Legion Cabs base in Surry Hills, with a service station attached, which was bought by fashion retailer turned property developer Danny Avidan for $18 million in June.
He has since submitted plans for a seven-storey complex of 60 apartments, ground-floor shops and underground parking.
George Ajaka, from White and Partners, who was advising Legion on the sale, said most would be one- and two-bedroom apartments and he said that prices would start at more than $650,000.
“The number of apartments is very limited in Surry Hills, which means any new stock should be able to get a premium price,” he said.
The dominance of the two supermarket giants, which between them control about half the market, has forced most service stations from having traditional mechanics’ workshops to being convenience stores that also sell fuel.
Industry insiders say this means sites now have to be bigger and in locations with a higher volume of passing traffic.
The typical inner-city petrol station is often too small for these modern operators – a typical site is less than 1800 square metres – but “an ideal size to put a boutique development on”, said agent Paul Hunter, associate director of Cushman and Wakefield, who sells service stations across NSW, including many in inner Sydney.
He sold one of them on Anzac Parade, Kensington, in 2010 for $3.5 million. Since then 30 apartments have been built on the site.
Another, on Miller Street, Cammeray, that sold a year earlier for $6.48 million, was turned into a 40-unit development.
“As values keep growing in the inner city areas, it becomes easier to sell off the land as a development, as opposed to keeping it as a service station,” Mr Hunter said.
A service station on Clarke Road, North Sydney, on a pocket-sized 380 square metres, was bought by a developer in 2010 for $875,000. He built a two-storey house with double garage that sold in September for $1.95 million.
Selling agent Mark Jackson, of Belle Property Neutral Bay, said while some buyers wanted to know that the site had been properly cleaned up, the fact the house was on a busy road was “more of a stumbling block than it previously being a service station”.