The seismic shift the convenience retail witnessed in 2020 has attracted buyers to the market, with demand out-stripping the supply of available stores all year, a new report has revealed.
Property adviser Christie & Co. said they observed a 19 per cent increase in transactional activity in the sector last year, as they released their annual Business Outlook report.
The increase in demand meant the timing to complete a deal compressed and asking prices were frequently achieved or exceeded after competitive bidding, the report added.
Christie & Co’s convenience retail price index for 2020 observed a 2.2 per cent increase to average sale prices, reflecting a positive year.
The firm expects buyer demand to continue outstrip supply across convenience and forecourt sectors, despite more stores coming to market as corporates and multiples shed the tail end of their portfolios.
“Whilst frontline emergency services have been immense you cannot ignore the way essential local convenience-based businesses have risen to the challenges they faced,” commented Steve Rodell, managing director of retail at Christie & Co.
“They really are at the heart of our communities. I completely understand why buyers want to run a local convenience store right now.”
A survey of convenience retailers as part of the report has also underpinned the significant improvement to the operational performance of the sector during the COVID-19 pandemic, with almost two in five (38.5%) respondents noting the pandemic had a positive impact on their business.
Half of the retailers expect this boost could be sustained for up to three years before the sector returns to pre-COVID levels. The report also suggests a long term and sustainable bounce from COVID-19, which could see around 10 per cent rise in convenience sales across the sector compared with pre-COVID levels.
Christie & Co said they look forward to a liquid market in 2021 as 45 per cent of respondents to the survey indicating they are interested in selling, along with 46 per cent who are interested in buying businesses.
The report also found the forecourt sector remaining resilient and attractive to investors, despite an unpredictable backdrop.
The report highlights the increase in forecourt shop sales as a key trend which emerged in 2020, helping many businesses to offset reduced fuel volumes and improve profitability.
This was driven largely by the shift in consumer behaviour in favour of local stores over larger chains following national lockdowns and restrictions on movement, the report noted.
“I’d like to focus on the positive way the forecourt sector not only stepped up to the operational challenges it faced but also the way it will adapt and thrive into a bright future,” Rodell said.
Over half of the forecourt operators surveyed (53.6%) as part of the report said the pandemic had a moderate impact on their business, with most respondents predicting the sector to return to pre-COVID levels within the next three years.
On a positive note for those forecourts on the market, 53.3 per cent of the respondents said they are interested in buying while 21.4 per cent are interested in selling.
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