Service stations return to favour as charging constraints boost outlook

Vanessa Rader, Head of Research - Ray White Group

The commercial property market enters 2025 with renewed optimism following the first interest rate reduction since late 2020. While commercial sales activity has been subdued over the last couple years due to increased financing costs, service station assets have demonstrated particular resilience. 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.

The fundamental challenge of installing charging infrastructure in residential settings has emerged as a key factor supporting service station investment. With approximately 30 per cent of Australians living in apartments or homes without dedicated parking, and 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. This structural impediment to home charging is unlikely to be resolved in the near term, reinforcing the strategic importance of service station locations.

Despite EV sales reaching 9.5 per cent of new vehicles in 2024, widespread residential charging limitations combined with rising electricity costs - up 14 per cent between 2022-2023 even after government rebates - have reinforced the long-term viability of traditional service station assets. Major operators have responded by expanding their retail offerings while strategically adding charging facilities, positioning their assets to serve both conventional and electric vehicle customers. This dual-purpose approach has proven particularly successful in maintaining strong customer engagement and revenue streams.

Service station transactions totaled approximately $750 million in 2024, with yields ranging from 4.5 per cent to 9 per cent. Assets in strategic locations with larger retail footprints capable of accommodating both refueling and charging infrastructure have attracted particular interest. 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. New South Wales, 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 rebate program. 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. This shifting policy landscape, combined with residential charging constraints and service stations' proven ability to evolve their offering, suggests these assets will remain essential infrastructure for decades to come.

The evolution of service station assets has also seen operators successfully expanding their food, retail, and convenience offerings. This diversification has proven particularly strategic as changing consumer behaviors demand more comprehensive service offerings. The longer dwell times associated with EV charging have created additional opportunities for retail revenue, further enhancing the business case for well-located sites.

For commercial property investors seeking secure, long-term income streams with built-in future optionality, well-located service stations continue to present compelling opportunities. Their ability to serve both traditional fuel retail and emerging EV charging needs, combined with strong underlying real estate fundamentals and development potential, positions them as an increasingly attractive asset class as interest rates moderate and the energy transition continues at a more measured pace.