C&I speaks to Dexus, one of Australia’s leading real estate groups, about managing service station assets and how sites can improve their worth.

Investing only in Australia, Dexus has a property portfolio valued at $45.3 billion including a $27 billion funds management business with properties across the office, retail, industrial and healthcare sectors. One of its managed funds is Dexus Convenience Retail REIT (DXC), a listed Australian real estate investment trust which owns high quality Australian service stations and convenience retail assets valued at $803 million.

C&I sat down with Eddie Giraldo, Head of Retail and Healthcare Leasing at Dexus, to discuss the transition of service stations to roadside retailers and how sites can increase their profit-making capabilities.

“Service stations have become hubs for retail convenience, with the ability to generate increasingly more profits from the retail store than the fuel pump. This is a significant shift and we have seen retailers respond by increasing their shop sizes and enhancing the retail tenancies attached to these sites.”

Giraldo said that enhancing the convenience retail offer is the biggest opportunity for major tenants and that today’s service stations are generating less profits from fuel sales than ever before with about 60-65 per cent of a sites profit derived from fuel.

“Major service station operators continue to invest in their retail convenience strategy to target the ‘basket shoppers’ who purchase fewer items, but on a more frequent basis. They see the expansion of their retail offer as a key growth opportunity, with the potential to overtake fuel as the key driver at these locations.”

Giraldo said Dexus actively identifies value-add opportunities that will enhance the customer experience as well as increase returns.

“For example, we recently repositioned the Murarrie and Canning Vale sites, expanding the retail offering to include a new Pizza Hut restaurant. Similarly, we expanded the development at the Redbank Plains to include a six-bay car wash facility on a new 15-year lease.”

DXC’s portfolio has a diverse mix of convenience sites in metro, regional and highway locations, offering exposure to sites with strategic advantages for retail convenience alternatives. It’s metro segment accounts for over 65 per cent of the portfolio, with most sites located in Queensland, while 17 per cent of the portfolio are highway sites and the remainder are regional sites.

“Demand for service station and convenience retail properties remains high due to the long leases strong lease covenants and exposure to non-discretionary spending.”

Giraldo said there are a number of factors Dexus look for when acquiring a site including land size, strategic location, lease terms, and the tenant covenants.

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