Gas Station NNN Properties for Sale
For investors exploring triple-net lease investment prospects, gas stations are an industry that comes up often. That’s because this type of tenant checks all of the boxes that many commercial real estate investors are looking for. They typically offer longer-term leases with recession-resistant businesses and prime locations.
Over 90% of U.S. households own at least one car, and Americans continue to place a high value on car ownership. In the past five years, vehicle registrations increased by 3.66%, indicating a continuation of the upward trend in vehicle ownership. With over 278 million vehicles on the road in the U.S. alone, it’s clear that gas stations aren’t going anywhere.
Gas Station NNN Properties Overview
One of the most compelling aspects of a gas station tenant for your triple-net lease is the stability and security that these businesses offer. They tend to be resistant to inflation and recessionary economic conditions – and with car ownership continuing to rise, gas stations are here to stay. Plus, with low maintenance costs, gas stations offer consistent revenue.
In difficult economic times, commercial real estate investors typically gravitate toward tenants who will not default on a long-term lease. These tenants are those who provide non-negotiable services. Think grocery stores, medical offices, dollar stores, and convenience stores – and, of course, gas stations. Even as wallets grow tighter, people still need gas to get to work, take kids to school, and run errands.
Due to their recession-resistant qualities and tendency to gain repeat customers, gas station leases are generally seen as low risk. They offer marketable value, and some are even backed by a corporate guarantee. These factors make the gas station sector a promising place to look for any corporate real estate investor.
|Gas Station Triple-Net Lease Properties Overview
|7-Eleven, Wawa, Circle K, Chevron, Shell
|Number of business entities
|Average NNN lease property cost
|$2,000,000 - $4,000,000
|Average cap rate
|4.5% - 6.0%
|Typical lease term
|10 - 25 years
|Average lot size
|1.5 - 2.5 acres
|Prime locations with high traffic counts
Common Gas Station NNN Lease Tenants
Some of the most well-known gas station triple-net lease tenants include 7-Eleven, Chevron, Circle K, Shell and Wawa – although there are plenty of others on that list, too. While there are some standalone convenience stores that can be strong NNN lease tenants, gas station tenants are particularly attractive due to the prime locations they prefer.
Gas stations typically sit in prime locations with high traffic counts and easy accessibility to other essential businesses. You’ll often see gas stations on bustling retail corridors near dollar stores, drug stores, fast food, and even grocery stores. In addition to the attractive locations of these properties, many gas station companies are investment-grade tenants, meaning that they are in strong financial positions and have a low risk of default.
Why Choose a Net Lease Over a Gross Lease When Investing in Commercial Real Estate?
If you are a commercial real estate investor looking for a gas station tenant, you will find numerous benefits associated with choosing a net lease over a gross lease. These two categories of contracts are usually considered opposites.
A gross lease will specify a fixed amount that a landlord charges a tenant to use a given space. The tenant will never have to pay more or less due to fluctuations in operating expenses, as those are usually covered by the landlord. With net leases, on the other hand, landlords can pass operating expenses to tenants, creating a more passive investment.
Single (N), double (NN), and triple (NNN) are the three available tiers of net leases. Each level gives the landlord more ability to transfer additional expenses to the tenant, absolving themselves of increased risk as the tiers increase.
Single-net leases, or N leases, involve the tenant paying for property taxes and rent – but the landlord still has to pay for insurance, maintenance, repairs, and utilities. N leases are less common in the world of commercial real estate. Double-net leases, or NN leases, and triple-net leases, or NNN leases, are significantly more common.
What Types of Net Leases Are Common in the Gas Station Industry?
Most gas station tenants will sign ground leases with primary terms between 10 and 25 years. Some of these tenants, like Wawa, will even make a significant investment in constructing a built-to-suit structure, which will become the property of the ground lease owner at the end of the lease. When tenants invest in construction like this, they’re even more likely to stay.
Gas station tenants typically use NNN leases, or triple-net leases. With a NNN lease, the tenant is accountable for operating expenses and costs related to the property, which can include insurance premiums, property taxes, and structural maintenance or repair costs. That makes NNN leases the preferred option for most commercial real estate investors.
While triple-net leases often involve tenants paying a lower base rent since they’re responsible for all of the operating costs, they are still desirable. That’s because NNN leases reduce the responsibilities of property management, meaning that the investment is more passive for the landlord or commercial real estate investor.
How to Evaluate a Gas Station Net Lease for Sale
The two main factors to consider when evaluating a gas station NNN lease are property value and tenant strength. Especially when you’re reviewing single-tenant properties, like the ones that gas station tenants prefer, your tenant concentration can be only either 100% or 0%. That is to say that you’ll be generating 100% of your potential cash flow or none of it.
In order to raise the odds that your gas station NNN lease remains occupied, you’ll want to ensure that your property meets the qualifications that these tenants prefer in their locations – visible locations in highly trafficked areas near other essential businesses. Meeting these criteria will help ensure that your investment property continues generating revenue for you.
On the plus side, gas station NNN lease tenants are generally large companies with strong balance sheets, so you can count on getting your payments in a timely fashion each month. You won’t have to waste time chasing down tenants to get your latest check.
What Makes Gas Stations an Attractive Industry for NNN Leases?
The oil and gas industry in America is a whopping conglomerate of institutions that records billions of dollars in revenue each year. In fact, the market size of the U.S. oil and gas industry was measured at $237.5 billion in 2022. And if that figure isn’t staggering enough, consider that it represents a 25% year-over-year increase from revenue in 2021.
Gas stations are just one downstream piece of this massive industry, but the continued increase in U.S. car ownership and gas consumption signals sunny times ahead for these commercial real estate tenants. As you look for the perfect NNN lease property, tenant strength is a crucial consideration – and gas station tenants are poised for success.
How Do Gas Station NNN Properties Compare to Others?
Unlike many other brick-and-mortar retailers, gas stations have been virtually unaffected by the shift to online shopping and e-commerce growth rates in recent years. Think about it: You can’t exactly gas up your vehicle online. And if you’re worried about the threat of electric vehicles to the oil and gas industry, don’t be.
While electric vehicles certainly receive a lot of media attention, they’re not as common as some people would make them out to be – as of 2022, they make up only about 1% of all vehicles on the road in America. While this number is likely to grow, there are plenty of old-school drivers out there who continue to need gas and snacks on a road trip.
From a commercial real estate investment perspective, this is good news: when your tenants succeed, you’ll reap the benefits of continued occupancy and ongoing revenue. By combining a recession-resistant business with prime locations and investment-grade tenants, the gas station industry provides numerous opportunities for triple-net lease investors.Pharmacies