Investors Seek ‘Amazon-Proof’ C-Store Opportunities

Fuel margins and retailer connections with local customers make the sector attractive.

December 06, 2019

DALLAS—Convenience stores represent a golden opportunity for real-estate investors, reports. “Many investors of single tenant retail properties are drawn to C-store properties due to the overall performance of the gas sector, being naturally ‘Amazon-proof’ as well as the financial strength backing the leases of these convenience store brands,” said William Wamble, first vice president of SRS Real Estate Partners’ National Net Lease Group.

Real-estate investors also receive a tax break when buying gasoline station properties due to the Tax Cuts and Jobs Act of 2017. That has accelerated the growth of larger chains. “7-Eleven is aggressively expanding, splitting its efforts between new development and acquiring smaller and regional players,” said Patrick Nutt, executive vice president of SRS Real Estate Partners’ National Net Lease Group. “Sheetz, Cumberland Farms, QuickTrip and Racetrac are all active at this point, pursuing new locations which bodes well for net lease owners and investors looking to acquire over the next 12 to 24 months.”

Fresh foodservice is fueling their popularity. “There seems to be a clear bifurcation on the C-store business model, one playing the volume game of low-cost fuel and more focus on a higher quality in store product, such as Wawa, QuickTrip, Sheetz and the like,” Nutt said. “They have changed the category of convenience food, offering high-quality sandwiches, coffee and prepared foods. Their competition looks more like Panera than an old gas station with hot dogs and microwave burritos.”

Wamble pointed out that scale and efficiency is important for chains to succeed in gasoline distribution, too. “There are weeks or months where operators may experience gas sales at a loss or break even, so having the ability to save a few cents per gallon up-stream in the supply chain is crucial,” he said. “The great retailers of the world, Walmart, McDonald’s and others, have been enjoying efficiencies of scale for decades, so it’s no surprise the gas space has seen similar influences.”