It is no secret that gas stations and convenience stores (c-stores) have evolved from their prehistoric "pump station" birth. Understanding this evolution is key to analyzing the industry and valuing these properties.
C-Store valuation is built upon standard components that appraisers must consider:
Location
Size and Shape
Excess/Surplus Land
Physical Characteristics (parking, maneuverability, frontage, access, visibility, traffic counts, ingress/egress, traffic control lights)
On-Site Storm Detention
Soil Conditions
Toxic Hazard
Flood Zone
Utilities
Easements
Site Improvements
Conformity
Population density, age, income levels, etc. (that which is covered in the Neighborhood Description part of a report).
Among the most important components are forecourt, frontage, and maneuverability.
Forecourt AKA Store Envelope
The forecourt welcomes patrons; it’s made up fuel dispensers, a canopy, drive through lanes, and parking. If the forecourt is congested and ill-designed, that may just be enough to cause customers to head a mile down the road to the next store.
A lot of thought has gone into the layout of the modern station for ease of use by the consumer. Gassing up is one thing, but getting the consumer to use one of the other components within the C-Station is even more important and no easy task. In his 1999 article in the Appraisal Journal, Steven P. Smalley, PhD, talked about good vehicular maneuverability throughout the envelope. He was correctly pointing to the need for large turning radius, less potential friction and jockeying among cars entering and egressing the station. He was also clearly pointing out that as components are added the need for larger site sizes is equally important. It is also paramount to mitigate any potential negative impacts on any adjoining properties. When it comes to Co-Branding, the layout of the site for such companies as McDonalds is almost no different from their layout criteria for a freestanding store. Chevron, Shell, Mobil, among others, have established minimum criteria that must be met before sites can carry their brand. The push by all companies is that the store envelope is such that the sites are economically viable from the start.
Frontage
This is mainly focused on Limited, Traditional, and Expanded Convenience stores (not including warehouse stores like Costco and Sam’s, which deviate from traditional gas station placement). For any c-store with gas station to be effective, ease of access is a must. They should be located on Collector or Primary streets, with the corner locations on viable Secondary streets. In urban areas, the minimum frontage is at least 100-feet on the collector highway. If there is a truck fueling component this minimum frontage jumps up to 300 feet. Based on the optimal site of 53,000 square feet, the square root is 230-feet. Therefore, one can see that 100 feet is truly a minimum frontage. Almost every co-brand partner has their own minimum front feet.
A c-store with gas station doesn’t have to be on corner location to be effective, however it sure helps, and generally, they are located close by. The frontage allows for ease of ingress/egress. The access characteristics are determined by permitted turning movements from the collector street in and out of the property in addition to the secondary access points. Full ingress/egress is where there is left-right for both entering and exiting the property. Limited access is where there is a medium or other limiting factor that restricts ingress and egress.
Limited access may or may not be a negative. There are other factors that can mitigate right-left in and right-left out. In addition to having excellent visibility, the traffic count becomes a major component. Eighty percent of all convenience stores are located on major collector streets. Traffic counts in excess of 15,000 cars may be needed to sustain a limited selection store. As one climbs through the type of stores to Hyper Convenience, the needed traffic count increases. What may be as important is the side of the street on which the store is located. The “going home” street side will support the quick service restaurant (QSR) and gas needs at the same time. Limited access on the out-bound side of the street may have a greater negative affect on sales, etc. Every company has their requirements, some of which are clearly spelled out and some are not. For example, 7-Eleven requires a traffic count of 25,000 cars in addition to pedestrian support.
Another frontage criterion to consider is the speed of the traffic. Ninety percent of convenience stores are located on streets where the traffic speeds are less than 45 miles per hour. Steven P. Smalley went even further and graded stores based on traffic speeds. Speeds that were 30 miles an hour were rated the highest. 30 to 45 miles per hour were graded less and traffic speeds above 45 miles per hour were given the poorest grade. Most urban stations/convenience stores are never going to reach these speeds. The more suburban stations will be affected by this variable. Rural convenience stores will nearly avoid this pitfall more often due to the lack of nearby competition.
Parking and Maneuverability
Criteria changes from company to company and can very much depend on a company’s business model and target audience. Between three and four spaces per 1,000 square feet of building area is typically desired as a minimum. Depending on the profit centers on site it may be more, but never less. One really needs the customers to move away from the pump once that part of the transaction is complete. There needs to be an ease of transition or maneuverability across the forecourt that is easy, safe and, most of all, convenient.
As Stephen P. Smalley pointed out “customers have become highly adept at rapidly assessing gas station convenience and making rapid decisions accordingly, [9]. The appraiser must have a "big picture" view, and needs to consider the forecourt, looking at the means of access from ingress to final egress. One needs to be aware of everything from the site size and its planned layout. What are, if any, its turning radius for the cars, vans and trucks? Are there external barriers to access (potential external obsolescence) such as median restricted in-out combinations, traffic signals, and other access features that may help or hinder the site’s free flow? Is on-site parking easy, available and conducive to being used? For on-site navigation, the number of turns may become very important to reach the fueling points and the c-store if need be. Smalley went on to say that each of these points should be analyzed, especially in comparability between stations. He developed twelve different types of barriers that tend to diminish the convenience of a location. He pointed out that, “Convenience is the outcome of a lack of barriers.” Site maneuverability and parking are a major component of this.
When co-branding is added into the mix, parking and maneuverability almost become center stage. McDonalds requires 65 parking spaces, and stacking room for eight cars in the approach to the drive through.
Final Thoughts
C-store owners realize that fuel sales alone can’t cover the cost of the initial c-store investment. Equally important to this is an appraisal partner who can properly value all of the other components that create the blueprint for an effective c-store.
The evolution of this industry demands appraisers to constantly educate themselves; this evolution also puts into question location studies of the past (Location Quotient, Drive Time, and Ring studies) which may not account how frontage and maneuverability draw customers.