The electrification of transport is here.
The impact on real estate? One sector stands out.
Roadside.
EVs on the Road
In 2011, The Department for Transport (DfT) announced financial incentives for buyers of electric vehicles (EV). It led to a new era for the UK auto industry and the start of the EV revolution. Sales surged and by 2019 there were 100,000 EVs on UK roads. Fast forward to 2024 and the next significant milestone is about to be reached. One million EVs on UK roads (SMTT).
Worringly, the transition slowed down in 2023 and early signs for 2024 indicate a similar pattern. EVs are expensive, government grants are being phased out and consumers have fears over the transition, especially over range anxiety. Currently, around 15-20% of all vehicles sold in the UK are EVs (SMTT).
Regardless of the pace of the transition, we need to accommodate the nearly one million (and growing) EVs on the road. What differentiates EVs from internal combustion engines (ICE)? Electric vehicles are powered by batteries. The batteries require charging and for that we need charging infrastructure.
This is where roadside real estate comes into play.
What is roadside real estate? Put simply, it is real estate located near roads, whether it be near busy motorways or high-population areas. This can be anything from petrol filling stations (PFS) to retail warehouses, drive-thrus, car parks and electric forecourts. These are prime locations for charging infrastructure. Chances are, if you own roadside real estate, you have considered EV charging infrastructure. If you haven’t, reach out!
Benefits to owners of having charging infrastructure on site include income from the charging operators, increased foot flow and improving a site’s green credentials and investment value. Moreover, the charging infrastructure tends to be built and financed by the charging operators. Landlords need to ensure they have the right planning, electricity, and grid capacity in place. Some local authorities now also require owners who build roadside properties to add EV charging facilities as part of the planning requirements.
Whilst EVs have not revolutionised roadside property, one company stands out. Gridserve. They are taking the concept to a whole new level and are the company behind Electric Forecourts. Gridserve defines the Forecourts as follows:
The facility provided an update on the traditional petrol station model, providing multiple high-power chargers with a purpose-built facility where drivers could shop, relax or work while their vehicle charges.
Gridserve’s first site was built in Braintree, UK, in 2020. Having been to the Braintree Forecourt, I can confirm it is a significant update to the traditional PFS. It is modern, clean, and has the required amenities. It has to be that way. A typical charge with an EV takes 30-60 minutes (on a rapid charger) and more time on site means higher demands and expectations from drivers.
There is a new player in town and they are changing the rules of the game. If these forecourts prove to be financially viable, I suspect we will see many more. Gridserve now has 13 sites across the UK (completed, in planning, or under construction). One of the major risks they face (and the general EV charging market faces) is charging speeds significantly increasing or becoming wireless, driving range to increase, or the market becoming saturated. As of January 2024, the demand is there and supply is growing at an astronomical pace.
Forecourts threaten traditional PFS but also provide them with an opportunity. An opportunity to upgrade their sites, add EV charging infrastructure and improve their retail offering. EVs are forcing roadside owners to consider novel asset management opportunities. The more we transition, the more the need for roadside real estate to adapt. This is not just the case with traditional PFS, but all forms of roadside, especially drive-thrus, the focus of my next piece!
From an investment perspective, roadside real estate is in high demand and experiencing one of the sharpest yields in commercial real estate. Why? Because people drive. They have family to visit, properties to view and kids to drop off. Regardless of the state of the economy, people drive. Whether fuelling ICEs or charging EVs, roadside real estate is required to facilitate people’s journeys. This is why I am bullish on the sector.
The good news is that Lewis & Partners will shortly be bringing a roadside investment to the market.
Thought from the past month:
Whilst we steam ahead with four-wheeler EVs in the UK, the focus in India is on two-wheelers. What impact does this have on roadside real estate in India?
I need to find out what is happening here - Gail’s bakery is planning a drive-thru in London - great concept in my opinion which seems to have stalled.
Major divergence in purchaser nationality between West End and City office investments. UK investors are bullish on the West End, whilst Asia Pacific investors are snapping up City offices. Transactional activity in both markets is well below the 10-year average.