The interesting reason service stations are a hot investment

Ray White head of research Vanessa Rader said the sector had shown “particular resilience” in recent years despite climbing interest rates that saw commercial investors playing it cool.

“With rates now beginning to ease, investors are increasingly attracted by the sector’s proven income security, traditional fuel retail operations and growing strategic importance in the EV charging network, suggesting both increased sales volumes and potential yield compression in the coming year,” she said.

Investors are being lured by the service station sector for a number of reasons, including the complexities of setting up home-charging EV stations, given about 30 per cent of Australians live in homes or apartments without dedicated car parking, Radar said. 

“The fundamental challenge of installing charging infrastructure in residential settings has emerged as a key factor supporting service station investment,” she said.

“[Given] the significant costs and body corporate complexities of retrofitting existing buildings with charging facilities, conveniently located service stations are increasingly vital to Australia’s transport infrastructure.”

Electric vehicle sales accounted for 9.65 per cent of all new cars bought in Australia in 2024, compared with a market share of 8.45 per cent in 2023, according to data from the Electric Vehicle Council.

Across the nation, about 114,000 new battery electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV) were sold last year, up on the previous record of more than 98,000 sales in 2023,  the data revealed.

This can be broken down to about 91,000 BEVs and about 23,000 PHEVs.

Aman Gaur, head of policy, legal and advocacy at the Electric Vehicle Council, said that, despite the progress, Australia still had a long way to go to achieve its climate and EV targets and match the adoption rates of other developed nations. 

“The introduction of the New Vehicle Efficiency Standard [NVES] this year is a promising step forward, but accelerating momentum will also require increased investment in infrastructure, more incentives, updated regulations, nationally consistent policies, and proactive efforts to combat misinformation,” Gaur said.

The NVES, which came into effect on January 1, is designed to incentivise car manufacturers to supply cleaner and cheaper-to-run cars and keep Australia on track to achieve net-zero emissions by 2050.

Major service station operators have responded to the growth of EVs by expanding their retail offerings while strategically adding charging facilities and positioning their assets to serve both conventional and EV customers. 

“This dual-purpose approach has proven particularly successful in maintaining strong customer engagement and revenue streams,” Radar said. “Service station transactions totalled approximately $750 million in 2024, with yields ranging from 4.5 per cent to 9 per cent.”

She said the structural impediment to home charging was unlikely to be resolved in the near term, which further reinforced the strategic importance of service station locations.

“Assets in strategic locations with larger retail footprints capable of accommodating both refuelling and charging infrastructure have attracted particular interest,” Radar added.

“With interest rates expected to moderate in 2025, these assets are likely to see renewed investor demand given their strong underlying real estate fundamentals in high-traffic locations, quality income streams from established operators, and demonstrated adaptability to changing consumer needs.

“Many sites also retain valuable future development potential, providing investors with multiple exit strategies.”

The sector’s investment outlook is further supported by a more measured approach to EV transition across most states, Radar added.

“NSW, Victoria, South Australia and Tasmania have all ended their EV purchase rebate schemes, while Queensland has maintained its increased rebate and Western Australia has extended the rebate program,” she said.  “Only the ACT maintains a target of 100 per cent EV sales by 2030, though it, too, ended its free registration and stamp duty exemptions in June 2024.