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Petrol stations - the overlooked underdog of property developmentBy: Angus Middleton

Angus Middleton, Argyll Environmental

Property developers seeking prime development opportunities on major arterial routes should not discount the potential of decommissioned petrol stations in both urban and rural locations.

I have been involved with the clean-up and redevelopment of petrol stations since the early 1990s, so have had knowledge of several hundred. While a third of decommissioned petrol stations in the USA are thought to be contaminated, my experience suggests that only around 10 per cent of decommissioned UK sites are seriously contaminated. This means that about one in ten are polluting the surrounding area and will require extensive remediation before they can be redeveloped for any use.

The legislation in the UK requires housing to be built on very clean land, whereas commercial buildings can be built on slightly more polluted ground. Most petrol stations are at least mildly polluted, so are likely to be most suitable for redevelopment as shops or offices. Many such redevelopments will need nothing more than a good contaminated land investigation1, but poor understanding of the risks means that many investors will not even consider petrol stations.

Indeed, I believe that widespread trepidation regarding petrol station sites has driven market values down, meaning savvy developers who do their research could turn a healthy profit at comparatively little initial cost and risk.

Across the UK there are decommissioned petrol stations that have remained empty for months if not years. Such sites are crying out for redevelopment and they are often in good urban locations on prime thoroughfares, ideal for office or retail redevelopments. These require less rigorous remediation than housing developments and so can present a very good return on investment. Letting them be used as hand car-washes seems to me to be a great waste.

Property developers shouldn't discount petrol station sites as simple environmental desktop reports can help identify how much remediation a site is likely to require. Such cost effective and expedient information can swiftly help developers screen portfolios and decide whether to proceed with individual purchases. As a sensible precautionary measure, all petrol stations should be properly investigated prior to purchase, including the taking of soil and groundwater samples (Phase II investigation). This will almost always be required to gain planning consent and can be a powerful tool for negotiating purchase price. With detailed ground investigation reports often turned round in as little as four weeks, such sites can be swiftly evaluated.

In my experience, large numbers of disused petrol stations in the UK are not seriously contaminated. Indeed, compared to some brownfield sites, they can be relatively simple to get through planning and remediate in conjunction with a new well-designed development.

Property developers should do as much research into a site as early as possible, because the longer there is to remediate a site, the more options will be available and the lower the costs. Unexpected problems can arise during redevelopment, such as the discovery of unrecorded tanks or old soak-aways full of oil residues, but the sooner these are spotted the easier they are to address and the less of a problem they become.

Petrol stations can undoubtedly offer great opportunities, but it is worth giving you a cautionary tale at this point. I was recently involved with a former petrol station that needed a Phase II investigation to gain planning consent for an extension. The owner grumbled about how needless this was, seeing as it had been inactive since they bought it six years before. Unfortunately, we discovered almost a metre thickness of petrol in the ground beneath much of the property and leading towards the neighbouring pub and river. It turned out that the owners had purchased the petrol station off-market and had not carried out an investigation: a mistake that will cost them in excess of £100,000. They knew they were going to redevelop the site in some way when the bought it, so carrying out the Phase II then would have saved them a lot of money at very little initial risk.

When considering many petrol stations or a portfolio of mixed brownfield properties, detailed desktop reports should be used to screen all properties and weed out the worst sites. The remaining prospects should then be subject to Phase II investigations, especially the petrol stations, as this will assist with purchase negotiation and will be needed to gain planning consent. It will also help maximise profits.

About the author

Angus Middleton is Environmental Director at Argyll Environmental. Trained as a geologist and ground engineer, he has worked in the environmental sector for nearly 20 years. Angus has worked with Argyll Environmental since 2003 where his role includes leading on project management and product design for commercial and agricultural property conveyancing.

Features May 2013

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