What Becomes of Gas Stations When Cars Are Electric?

Apr 14

A Look at Developments in Retail Real Estate

Electric-vehicle charging stations are showing up at suburban shopping centers and in parking lots at retailers such as Walmart. (Walmart)Electric-vehicle charging stations are showing up at suburban shopping centers and in parking lots at retailers such as Walmart. (Walmart)

So what happens to the roughly 106,000 gas stations in the United States if President Biden’s efforts to jump-start the number of electric-vehicle charging stations is a go?

The president’s sweeping $2.3 trillion infrastructure proposal includes $174 billion for tax credits and other financial incentives to first rev up automakers to build EVs and EV batteries, and then consumers to actually purchase them at costs that are far more affordable than they are now.

The proposal includes a plan to add a half-million charging stations in the United States, though millions will be needed, to address what’s called “range anxiety” among EV drivers, or the fear of running out of a charge before they reach their destination.

That offers opportunity and remedial headaches for owners of gas stations, 80% of them with retail, according to the National Association of Convenience Stores. Many could shift into EV charging stations but will need to rethink layouts and merchandise mix.

The locations and build-outs of most gas stations are at busy intersections or near neighborhood strips where tight sites include lanes to fuel up and get out in 10 to 15 minutes or less, even with a quick run into the attached store or fast-food restaurants.

“Fill up quick and make room for the next car is the underlying business model,” according to NPD Group, the market research firm.

That prototype doesn’t work for EV top-ups. Those cars need anywhere from 30 minutes to eight-plus hours to recharge, dependent on the battery size, how empty the battery is and the outlet’s voltage.

And, considering most EV owners recharge their batteries at home, a station around the corner isn’t likely to hold the same benefit as a gasoline fill-up station.

NPD Group expects charging stations in “more remote locations, away from an urban center, will likely have more real estate to expand into and be a welcome sight along the electric-powered journey.”

However, in dense urban areas that cater more to multifamily living than single-family, “public charging will be required, spurred by on-street and commercial garage parking demand,” according to McKinsey & Co., the management consultants.

“Retail-driven charging stations may also be part of the future commercial landscape: Several retailers are already giving customers the opportunity to shop while powering up,” McKinsey said. Charging stations are popping up at suburban shopping centers, malls, strip centers and parking lots ranging from Walmart to Whole Foods.

NPD expects future smart charging stations will have to offer more than pure convenience store fare, seeing more Starbucks-like shops where people can relax or work in an environment more inviting than the typical truck stop.

“Twenty years or so from now, we can expect that today’s gas stations will be far fewer and further apart, particularly as our need for charging changes, thanks to at-home, overnight top-ups,” Eddie Hold, president of NPD’s Connected Intelligence group, said in a report.

“But those that do remain should be an interesting hybrid of a reminder of a previous transportation era, a roadside attraction of sorts, while also supporting the modern future of EV power,” he added.

Convenience Evolution

7-Eleven is already rethinking convenience store fare with its Evolution locations, testing grounds for the retail giant that also owns a number of gas stations.

7-Eleven is looking to change convenience store fare with fresh food, alcohol and mobile checkout. (7-Eleven)

The latest in what the company calls “innovations in a pioneering store format” opened this week in Prosper, Texas, about 40 miles from its headquarters in Irving.

These are not your father’s 7-Eleven stores, though Big Gulps are there. Here’s what’s in these new ones: tacos on handmade tortillas, frozen margaritas on tap, a stocked wine cellar and beer cooler, fresh-baked croissants and cookies, customized espresso drinks, artisan craft sodas, premium cigars in a cedar-lined humidor and more. The seven current locations even include mobile checkout and delivery.

By adding Laredo Taco Company restaurants to its stores, some with outside patios, 7-Eleven wants to change the world of convenience.

“You have to visit an Evolution Store to experience just how much 7-Eleven continues to raise the bar on product quality, selection and the overall shopping experience,” Chris Tanco, 7-Eleven chief operating officer, said in a statement.

Higher Prices

Speaking of gasoline, prices at the pump fueled a huge jump in the consumer price index, according to the Labor Department.

The 9.1% leap in gas prices last month was the biggest contributor to the 2.6% CPI upturn, the largest in nearly nine years. On a month-over-month basis, prices of goods and services were higher by 0.6% as the economy picked up steam, good news for retail property owners.

That’s inflation all right, but it’s more situational than worrisome, according to the government. Remember this: These are comparisons to last March, when much of the nation went into lockdown mode as the grip of the pandemic began its forceful hold.

A year-over-year jolt like this was widely expected because, as most folks will remember, no one was buying much of anything except for paper towels, toilet paper and ketchup. Now, with money to spend from savings and stimulus checks, expect to see an even bigger leap next month from the Labor Department as consumers go out again.

And no need to worry just yet about a rise in interest rates, which is how the Federal Reserve typically responds to inflation that’s above 2%. Chairman Jerome Powell told “60 Minutes” Sunday it’s “highly unlikely” the Fed will hike rates this year as it expects the economy and job growth to accelerate “much more quickly” for a number of months.

“It will be a while before we get to that place,” Powell said about raising interest rates to slow down the economy.

Confidential Offering – Absolute NNN Kum & Go – 16 Years Remaining with 7.5% Rental Increased every 5 Years

Apr 05

We are pleased to present the absolute NNN Kum & Go located in a Midwest market for your acquisition review. The 20-year lease commenced in July 2017 and has approximately 16 years
remaining with 7.5% rental increases every 5 years. The next rental increase is scheduled for July 2022. The subject property is located at the signalized intersection of W. Jackson Street and N. 9th Street, adjacent to the Ozark High School and Junior High School campuses.

  • Strong private credit
  • 16+ Years Remaining
  • 7.5% Rental Increases Every 5 Years (next in July 2022)
  • Three 5-year renewal options with 6% rental increases
  • Signalized Intersection
  • 15,000+ Vehicles per day in front of subject property
  • Large Format 5,000 Square Foot Store on 2 Acres
  • Population exceeds 33,000 within 5 miles
  • Offered at $5,440,000
  • Going-in cap rate of 5.35% increasing to 5.75% in July 2022

Contact Adam Levy at 312-698-9800 or alevy@kwcommercial.com for further details and to review the Offering Memorandum.

The Recovery Scores Some Easy Wins

Apr 05
“An anniversary is where you look back at having either fulfilled Cinderella or Lord of the Flies.”

– Fernando A. Torres, author

One year into recession, we should take a step back and take stock of where we stand, and Friday’s jobs report provides a place to start. March showed the largest monthly gain in payrolls since last August, with 916,000 net jobs created (as well as 156,000 additional jobs added to the January and February reports upon revision). The Diffusion Index, which measures the share of sectors increasing payroll, also has shown a strong rebound in 2021. The share of sectors adding jobs is back to the second-highest mark since the recession hit. This is really good!

Conditions are improving as vaccinations increase, right on time. But the cumulative damage from the past year is still substantial, as seen in the graph below. Comparing the current decline in jobs across industries after one year in recession with the previous recession is a useful analysis. The first thing that jumps out is that, unlike in 2008, not a single sector gained employment over the first year of the recession.

This is a bit surprising at first. Usually you see a few sectors still doing OK one year after the start of a recession. But we think this gives us an indicator of the underlying strength in the labor market outside of the hardest hit sectors. Or, should we say, lack of strength. The big job gains we are seeing are great, but those gains are really making up for the temporary layoffs and furloughs. There seems to be little economic momentum in other industries, and that raises the question of where exactly we will be once everyone is fully vaccinated. The next leg of the recovery starts with dropping social-distancing practices post-vaccine, but confidence in the economy to grow once we’ve recovered to pre-COVID levels will require more than just a boom in in-person spending and a return to bars and restaurants and hotels.

Although that will help! The next thing that pops out in the graph above is that shocking 25% gap still missing in the arts, entertainment and recreation industry. This far outpaces the weakest sector at this point in 2008, construction, which was also outdone by losses in the accommodation and food service sector over the last year. As we all can recite in our sleep right now, an airborne pandemic means in-person activities are extremely difficult, and these sectors won’t get back to normal until everyone is completely comfortable in close proximity to others once again. That day is approaching, but rehiring one quarter of employees will still take some time.

The one major positive is how the “contagion” appears limited compared to the 2008 recession. As fiscal and monetary stimulus was limited in 2007-08 compared to 2020-21, the fallout from overleveraged households and financial institutions took years upon years to sort itself out. This is why construction payrolls to this day have not returned to their 2006 peak. Due to the various household cash injections, expanded unemployment insurance, a quick-acting Federal Reserve to offer various liquidity programs, and, perhaps most importantly, forgivable Payroll Protection Program loans, such stagnation is unlikely this time around. The recovery in this recession’s hardest hit sector should be much quicker.

Construction’s slow death — it took five years before the job losses finally stopped — showed how arduous the recovery was last time around. While leisure and hospitality’s initial drawdown was much more severe, it was for an exogenous reason that should be mostly solved in a few months (quarters?). While we won’t downplay the pain facing thousands upon thousands of restaurateurs and hoteliers across the country, the fact that they are able to now rehire hundreds of thousands of employees each month is incredibly encouraging. As of March, 647,000 more employees were working in this sector than at the end of 2020.

Of course, millions more are waiting. But what was once looking like the worst and most difficult recession on record has become much more manageable. One of our long-running fears was that a more “traditional” recession, one with permanent job losses, was forming underneath the very nontraditional recession during 2020. We’ve been using the chart below to track that possibility. As of fall 2020, nearly 3 million workers had already been permanently laid off, a record pace compared to the prior seven recessions. Since then, however, this figure has fallen by over half of a million. Declines in permanent layoffs generally take several years into a recession to happen, another sign of the benefits to responsive fiscal and monetary policy.

We hope this trend continues, and see no reason for it not to over the coming months as more and more locations reopen. What the economic prospects will look like after the reopenings occur is more uncertain, but at least we are taking the easy wins where we can find them. The hope is that these gains in getting people back to work in the hardest hit sectors, along with the massive pent-up household savings, will be enough to jump-start economic activity across all industries.

The Week Ahead …

This week kicks off with the Institute for Supply Management’s Services Index, a measure of business activity in March. The manufacturing version, released last week, recorded rapid gains in activity for the sector in March, as production showed the broadest increase among respondents since January 2004. A strong number is expected for the services report, as well.

Elsewhere, the Federal Open Market Committee is scheduled to release minutes from its March meeting. This will likely reveal some underlying disagreements among members over the conditions needed to begin reducing stimulus. Chairman Jerome Powell has a firm grip over the decision-making, and backing from policy-minded Vice Chair Richard Clarida and Governor Lael Brainard in doing so. But there does appear to be more internal dissent building among regional Fed presidents, as seen in the widening dispersion in their projections for a future federal funds target rate.

CoStar Economy is produced weekly by Robert Calhoun, managing director and senior economist, and Matt Powers, associate director of CoStar Market Analytics in New York City.