C-store Real Estate Prices Lag in Big Three States


California, Florida and Texas have the largest number of convenience stores, and together they account for more than 25 percent of all convenience stores in the U.S. Texas has the largest number at 14,178, followed by California at 10,294 and Florida with 9,424. In this column we focus on real estate pricing trends in the big three.

Nationally, commercial real estate prices are emerging from the Great Recession. In August of this year, CoStar's Repeat Sales Index posted its strongest gains since the heyday year of 2006. Commercial real estate prices in 2012 advanced 7.6 percent from the year before. Commercial property prices across the nation are now up by 34 percent since 2010.

However, convenience store property prices are not following this upward trend. Through the third quarter of 2012, convenience store property prices have fallen from their peak in 2007 and are lower today than in 2011. The reason convenience store real estate prices are not maintaining the upward pace of other commercial property is likely due to the fundamentals of supply and demand. The 2008 Saturation Study, published by Convenience Store News, reported that the growth in convenience stores outpaced population growth from 2004 to 2008. The number of convenience stores across the nation grew by 12 percent, while the population only expanded by 3.6 percent. All other things being equal, this translates into more stores-per-person. In other words, an over-supply occurred. Ultimately, this imbalance should be reflected in real estate prices. Real estate is a lagging economic indicator and it often takes two to four years for property pricing levels to reflect an economic imbalance.

Figure 1: 2012 Convenience Store Real Estate Prices 

Figure 1 shows the 2012 average real estate prices for convenience stores in California, Florida and Texas. California leads with an average price of $1,463,852 per store. Florida follows in this price ranking of the big three at $1,053,764. Average convenience store property prices in Texas were $705,357 in 2012. While California and Florida are above the national average of $841,975, Texas convenience store real estate prices are below the USA average. The 2008 Saturation Study recorded the following saturation indexes: California 0.59; Florida 1.08; Texas 1.27. The national average is 1.0.

Interestingly, in 2008 Texas was experiencing a significant over-supply of convenience stores, the largest among the big three. California had an under-supply and Florida was close to the national average. Four years later, this ranking is exactly what the pricing for real estate in each of these states is showing. The most over-supplied market (Texas) had the lowest average convenience store property price and prices in Texas today are below the national average. California was the most under-supplied market and posted the highest convenience store property prices among the big three, well above the national average.

As noted in the 2008 Saturation Study, supply and demand are an important consideration in any location decision. Property prices follow economic fundamentals.

Robert E. Bainbridge is an author, instructor and expert witness in the appraisal and valuation of convenience stores and gas stations. He can be reached at [email protected] or (541) 823-0029. Find more valuation information at www.cstorevalue.com.

Editor's Note: The opinions expressed in this column are the author's, and do not necessarily reflect the views of Convenience Store News.

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