stations are among the most common types of commercial real estate and
the most difficult to appraise. The valuation of a gas station can be
as simple as the gathering of a handful of good comparable sales and
valuation analysis of the same kind that is applied to a house. Or it
may involve analysis on different levels: of income, of a going
concern, of construction cost, and of equipment.
gas stations of the early 20th century were vehicle-oriented facilities
offering gas, oil, repairs, and accessories and often sporting
decorative architecture like domed roofs and columned fronts. By
mid-century, these had evolved into the standard, functional two-bay
concrete block station with pumps out front, the kind of stations that
line the main streets of the era. Gas sales and car repair became
separate functions. Gas stations of the'70s and'80s were sited on large
lots near highway interchanges. Older gas stations often abandoned gas
sales in favor of repairs. The trend in recent years has been to the
development of convenience stores, or "C-stores," that offer very
little for the car other than gas but everything - chips, doughnuts,
coffee, and magazines - for the people inside. National Petroleum News reports
that, nationwide, between 1994 and 2000, sales volume in C-stores grew
by 86%, versus a lower growth rate of 46% in the retail gas industry as
a whole. All these different types of gas stations remain on the
landscape. At one time or another, it may be the job of the appraiser
to value any one.
Sales Comparison Approach is the most useful method of analysis for an
older two-bay station. Because most of the value is in the land,
comparisons are generally made on the basis of the price paid per
square foot of land. Important differences between a subject property
and a comparable property that has sold may be in terms of traffic
volume, exposure (does the traffic have time to look or just whiz by?),
access (is half the traffic blocked by a median?), presence of nearby
competition, and the contribution of the building (tired and old or
up-to-date?). It also can help to know the comparable property's tank
capacity, the age of the tanks, whether contamination has occurred, and
whether side agreements were involved in the transfer of pumps and
lifts. A superior appraisal ferrets out that data.
Income Capitalization Approach can be applicable for a gas station. The
aim is to make comparisons from the rental arrangements for other gas
stations to derive a net income for a subject property and to
capitalize the result. One obstacle to this approach is in obtaining
information from landlords and tenants who are tight-lipped. Another is
that gas station leases are often accompanied by vendor agreements that
require the tenant to buy petroleum product exclusively from the
landlord. The real estate lease then is only part of a larger
relationship, making the rental information less than useful.
Cost Approach is applicable in the valuation of a newly constructed
station. Much of the cost is incurred for what is typically considered
equipment, requiring allocation of the value to different components
(real estate, personal property) when the interest of the client (a
lender encumbering only the real estate for collateral; a condemning
authority; a tax assessor) is in the real estate alone.
fourth analysis considers the value of the going concern. A station may
have value beyond that reflected in its real estate and equipment.
Valuation of the going concern is made through analysis of historic and
prospective income and operating costs.
of the work of an appraiser is to determine which of these analyses is
likely to be useful in a given assignment. It is important at the start
that the appraiser and the client be clear what is to be valued and
which methods applied.