UK c-store business values near bottom

The value of UK c-store businesses are near the bottom as a five year pattern of decline looks to have slowed, leading business agent Christie + Co said this week.

In its 2013 business outlook, the company said that an 0.9 per cent fall in average sale prices in 2012 compares to the previous year bucked the trend compared to hotels, pubs and restaurants, where it also has a leading market position.

Steve Rodell, the director who heads its retail team, suggested reasons for optimism even though the market remains polarised. Both the major supermarket companies and the co-ops are competing strongly for good c-store sites, particularly with petrol attached, and these businesses are getting good prices. Again the south east is strongest but Christie’s teams make a good case to look at the profit potential in suburban Manchester, for example.

The business outlook report tends to reflect current thinking about the market overall rather than lead thinking but this year Christie’s work on forecourts provoked some controversial headlines about the massive investment by the supermarkets. On the ground, the major wholesalers are carefully leveraging their symbol group assets, seeking to compete.

In his published report, Mr Rodell wrote that symbols “are rapidly becoming major brands in their own right, gaining better deals from suppliers and attracting more customers as a result.”

However, for many retailers their location and footfall put them outside the multiples’ ambit and the prices they can get from private buyers are further dampened by the lack of finance. Banks in particular are bearish on the c-store market (indeed, they are bearish on the more highly rated coffee shop market according to the team from Harris and Hoole that took money from Tesco instead!).

In the south east a proportion of businesses are changing hands through private sales from family to family or within families. Outside, Asian and similar buyers are keen to acquire shops from private sellers. Their business idea is simply that they are prepared to work harder and longer to make the shops a success.

However, some sellers with a mind to the prices they could have obtained in 2007 have been holding out and waiting for an upturn. The sentiment now is values won’t rise strongly before 2017 or 2018 and may never get back to 2007 levels for businesses that are not investing. The average price in 2012 was 18 per cent below the 2007 peak.

Mr Rodell says people in this position should speak to his team and get a fair appraisal of their business value. With regional offices and a strong commitment to talking business, Christie’s believes it can obtain the maximum value for retailers.

However, some sellers are put off because Christie’s will be honest about the business value. If they think it is £100,000, they will say it is £100,000. Mr Rodell advises retailers not to be swayed by agents who then tell the retailer they can get £175,000. Sharp practice by some agents is damaging the market, he says.

The comparatively low cost of entry to the convience market means that there are still plenty of buyers. As a result volume sales remain good, with Christie’s recording more than 9 per cent more completions in 2012 compared to the previous year.

While symbol group membership can help improve businesses, there is no automatic link to an increase in value. “An uplift in value is only driven by an uplift in trade,” says Mr Rodell. “and value is a factor of profit.”

Some retailers are astutue enough to understand which symbols work in which areas and the value added by their management skills are the most important factor. Business values at the single outlet level are driven by common sense. Retailers have to pay careful attention to rents and ensure that there is some headroom when they find a great site in case multiple competition moves in next door.