Site essentials of convenience stores and retail fuel properties.
Article Type:
Report
Subject:
Convenience stores (Location)
Convenience stores (Design and construction)
Service stations (Motor vehicles) (Location)
Service stations (Motor vehicles) (Design and construction)
Commercial real estate (Valuation)
Industrial locations (Economic aspects)
Real property (Valuation)
Real property (Methods)
Author:
Bainbridge, Robert E.
Pub Date:
01/01/2012
Publication:
Name: Appraisal Journal Publisher: The Appraisal Institute Audience: Trade Format: Magazine/Journal Subject: Business; Real estate industry Copyright: COPYRIGHT 2012 The Appraisal Institute ISSN: 0003-7087
Issue:
Date: Wntr, 2012 Source Volume: 80 Source Issue: 1
Topic:
Event Code: 120 Organizational history; 800 Capital funds & cash flow
Product:
Product Code: 5411300 Convenience Stores; 5541000 Gasoline Stations NAICS Code: 44512 Convenience Stores; 4471 Gasoline Stations SIC Code: 5411 Grocery stores; 5541 Gasoline service stations
Geographic:
Geographic Scope: United States Geographic Code: 1USA United States

Accession Number:
283945509
Full Text:
Today's convenience store occupies a unique place In the retail landscape. There are more than 146,000 convenience stores In the United States and more than 117,000 sell motor fuel. Convenience stores are special-built properties designed to make money In only one way, and they are not easily adapted to other uses. The fundamental determinant of value for a convenience store property Is its ability to generate earnings. Design features create and Influence the property value of convenience stores. This article helps the appraiser analyze the convenience store site. Current standards for convenience stoma are discussed, including site development criteria from major retailers and oil companies, as well as Issues related to site access and visibility.

**********

When valuing a convenience store site, appraisers must consider the site from the perspective of its retail earnings potential. In other words, how suited is the site to generating retail sales? All convenience stores require good visibility, easy access, and heavy traffic. Even the simplest property and store characteristics play an important role in a convenience store's value. This article explores the requirements convenience store owners and operators must meet to ensure a store's success and the details appraisers should note when assigning value to convenience store properties.

Functional Components of Convenience Stores

A convenience store site consists of three functional components: access, the forecourt, and the store envelope. A description of each component follows.

Access

Easy access to the site is an absolute necessity for a convenience store to thrive. All other factors being equal, the site with the most convenient access attracts the most customers. For a convenience store in an urban setting, the industry considers 100 feet of frontage to be the minimum amount of space necessary for access. For a location with truck fueling, a minimum of 300 feet of frontage and adequate space for vehicles to turn around are essential.

Entry and exit characteristics are usually identified as the permitted turning movements into and out of the site. For example, a site with full in and out access is described as "left-right in and left-right out." Limited access caused by a median may be described as "right-in, right-out," indicating that only right-hand turns into the site are permitted and only right-hand turns leaving the site are allowed.

Forecourt

The forecourt is the area where fuel dispensers and canopies are located. It is typically located between the street and the store.

Store Envelope

The store envelope includes the building footprint, the drive-through lane, and parking areas. Many local zoning ordinances are drafted from model legislation and call for a minimum of 3.3 on-site parking spaces for every 1,000 square feet of building area. The average convenience store site today is 52,991 square feet, a little over an acre.

Site Selection Criteria

Appraisers should understand what a convenience store developer looks for in a potential site. Site selection criteria vary from company to company, depending on the target market and business model. The following summary of location criteria for convenience food stores was prepared by the Planning and Development Department of Surrey, British Columbia, and highlights points appraisers should consider when assessing a convenience store site.

Store building characteristics:

* Parking for 10 to 15 cars should be available.

* Store size determines product diversity; older, independent stores have about 800 to 1,000 square feet, while convenience chain stores have 2,000 to 2,400 square feet.

* Visibility is important. The building and any signs should be clearly visible for at least 700 feet from both sides of the street.

Site Costs and the Economics of Co-Branding

Because of the need for good access, visibility, and heavy traffic, convenience stores tend to be developed on expensive sites. From the year 2000 to the present, site costs reached a high of over $1 million in urban locations. As Exhibit 1 shows, the average cost of a convenience store site in an urban area increased by 26% between 2000 and 2010. (1) Price declines are noted in the recessionary years of 2008 and 2009. The average cost of a convenience store site today is $647,991 in rural areas and $880,067 in urban areas, or $15.30 per square foot in rural areas and $20.79 per square foot in urban areas.

McDonald's Site Criteria

Urban land prices for convenience stores are higher than rural land prices. Consequently, co-branding a convenience store with a fast food restaurant has become popular in urban locations. For example, McDonald's claims that shared land can lower development and construction costs. Initial investment savings can range from $150,000 to $250,000, with annual operating savings of $10,000 to $25,000. McDonald's co-branding site criteria for urban/ suburban and rural locations are shown in Exhibits 2 and 3.

McDonald's market criteria for a co-branded facility are no different than the criteria required for a traditional restaurant. McDonald's criteria for urban and suburban sites are listed as follows:

* The store should be located in a prime location.

* The minimum lot size should be approximately 60,000 square feet (depending on setbacks, etc.).

* A frontage of 250 linear feet is required.

* Visibility should be excellent.

* The store should be located near income generators such as homes, workplaces, and retail stores.

* There should be a total of 65 parking spaces.

* Total drive-through stacking should be eight cars.

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The following are McDonald's criteria for rural sites:

* The store must be in a prime location.

* The approximate lot size should be 48,000 square feet.

* Frontage should be 223 linear feet.

* There should be a total of 40 parking spaces.

* Total drive-through stacking should be seven cars.

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ExxonMobil Site Criteria

Not every site is suitable for retail fuel sales, and major oil companies such as Chevron, Shell, and ExxonMobil have established minimum criteria that must be met before sites can carry their brands. These site selection criteria are established to help retail operators select economically viable sites. Brand identity and protecting their brand's public image are important to oil companies. When a retail store affiliated with a nationally recognized brand fails, the oil company's image is tainted and the public associates the brand with failure.

The specific site selection criteria used by ExxonMobil are listed here to provide an example of how oil companies evaluate potential sites:

* Exclusivity of trade area--A trade area's supply and demand profile is a key factor in site selection.

* High traffic counts--There should be 20,000 vehicles passing by the convenience store each day.

* +56,000 net usable square feet--The company will consider less square footage for stores in metropolitan markets.

* Residential density--There should be 15,000 existing or planned residences within a 1.5-mile radius.

* Excellent visibility--The site must be visible from one-third of a mile away.

* Excellent accessibility--There should be convenient ingress and egress from both primary and secondary streets.

* Signalized corner intersections--Ideally, stores should be located at four-corner sites.

* Absence of operating restrictions--A store should be open 24 hours a day, seven days a week, sell beer and wine, and have a car wash.

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The potential for diesel fuel sales is much greater at sites that can accommodate semitrailers than at sites that cannot. Although a large site may have good semitrailer access and parking space, it still may not be developed for truck fueling if the site is situated on a traffic route trucks do not use. Due to size and access limitations, some sites do not allow for semitrailer fueling. To help appraisers set minimum physical requirements for semitrailer access, ExxonMobil has set design criteria for sites that can accommodate truck fueling (see Exhibit 4).

Near Corner and Far Corner

"Near corner" and "far corner" refer to a retail site's position at an intersection. The first location a customer encounters in the direction of travel is usually the strongest. This is the near corner location. In Exhibit 5, the gas station is located at the near corner for vehicles traveling west in the east-west travel lanes and the far corner for vehicles traveling north in the north-south lanes. At congested intersections, the near corner can be a disadvantageous location because traffic may back up while waiting for the traffic signal to change and block the access points of the near corner site.

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Reaction Times and Visibility

Convenience retail concepts rely on unplanned impulse purchase decisions. Because of this, convenience locations require high visibility and good access, more so than any other property type. Driver reaction time and visibility are concepts that are closely related to accessibility. Although these considerations are of less importance for destination retail concepts such as big-box stores and movie theaters, reaction time and visibility are critical to the success of a convenience retail concept such as a gas station.

Driver reaction time refers to the amount of time a driver has once the store has been identified to make a safe traffic maneuver to enter the site. Longer reaction times are usually better and afford more customers the ability to shop at a particular location. However, a minimum reaction time is necessary. Although the minimum visibility distance can vary with traffic speed, the required line-of-sight distance is generally about 616 feet at 60 miles per hour and 308 feet at 30 miles per hour. This line-of-sight distance is the minimum visibility necessary for a customer to identify the business, make a purchase decision, and perform a safe traffic maneuver to enter the site.

Industry experts believe that the convenience customer not only needs to identify the business but must also perceive how to access the entry point within the required seven-second reaction time. Reaction times that are shorter than this do not allow the potential customer enough time to distinguish the subject offering from the visual background noise of the neighborhood landscape, make the decision to stop, and make the turn into the site.

Reaction distance varies with traffic speed. Higher speeds require longer distances to maintain the same seven-second minimum threshold. When a retail site lacks the minimum reaction time, potential drop-in customers pass up the location by necessity. Once a convenience customer misses the access point to a site, that customer almost never returns. He or she simply goes on to a competing location.

To determine the reaction time to a particular location, it is necessary to drive each approach three times and measure the reaction time from the viewpoint of a potential customer who does not have prior knowledge of the subject store's offerings or access point. Higher speeds, confusing intersections, traffic barriers such as raised medians, and many access points from nearby businesses can cause minimum reaction times to be longer.

Global positioning system (GPS) units are becoming more sophisticated and may one day play an important role in retail accessibility. However, accessing a retail location is currently a cognitive process that requires time and judgment on the part of the customer. Convenience retail locations requiring minimum customer cognitive recognition and judgment are the most successful.

Measuring Traffic Volume and Patterns

As previously stated, traffic volume is one of the most important components convenience store appraisers should consider when valuing a site. Appraisers should rely on authoritative sources rather than owner-operators for information regarding average daily traffic (ADT) volume. Detailed, comprehensive information about traffic volume and traffic patterns is available through federal, state, and local government agencies. An example of the type of traffic data available to appraisers is shown in Exhibit 6, which originally appeared on the Oregon Department of Transportation website. This information is derived from a permanently maintained automatic traffic recorder (ATR) located about one mile from the subject. The appraiser must know where the information was recorded to determine how well the collected data relates to the subject's location.

Seldom, if ever, would the appraiser attempt to record and collect traffic counts on the job; it is too time consuming. As Exhibit 6 shows, a location's traffic volume varies from day to day and throughout the year. Peak volume months are easily determined, along with separate columns for weekday versus daily traffic. Note that the daily traffic is higher than the weekday traffic in July, August, and September. More summer tourists and recreational travelers pass this location on the weekends, which accounts for this difference. Exhibit 6 also gives a detailed breakdown of the types of vehicles passing this location. The number of passenger cars and a variety of light truck and semitrailer classifications are shown. If the subject is marketing diesel fuel to semitrailers, this type of vehicle breakdown is important.

Traffic flow analyses show average daily volumes, peak hour and peak day volumes, monthly patterns, turning-lane movement at intersections, and vehicle types. Detailed traffic flow analyses are available from state transportation departments at a minimal cost. It is useful for appraisers to collect traffic maps to monitor trends in traffic volumes. With the growth of the Internet, much of this data is now available for free online.

Because convenience store business is affected by the amount of traffic on any given day, it is important for appraisers to understand at what time of year the subject experiences its lowest and highest traffic volumes. Recreational areas can have wide fluctuations in traffic volume, and sometimes the winter traffic volume is not enough to financially support such an operation. For this and other reasons, it is crucial to understand traffic patterns over the course of the year, not just on a daily basis.

The types of vehicles people drive also affect a convenience store's business, particularly stores that market diesel fuel to truck drivers. Information on the average daily traffic volume is not sufficient for an appraiser to value a truck stop convenience store accurately.

Exhibit 7, taken from the Oregon Department of Transportation website, shows the type of detailed information state transportation departments provide. This table shows the traffic volumes along particular segments of the highway, allowing the appraiser to determine where the traffic is coming from and where it is going. Exhibit 7 also shows the traffic volume changes that occurred during the previous year and the maximum daily and hourly traffic volumes at each counting station.

The Institute of Transportation Engineers (ITE) publishes the book Trip Generation, which is currently in its eighth edition. This is an authoritative source for the number of vehicle trips generated by various land uses. The information is compiled from statistical studies of over 4,800 sites. Over 160 land uses are included, such as freestanding discount superstores, fast food restaurants with drive-through windows, and drive-in banks. Various configurations of convenience stores are also included. Exhibit 8 shows an example of some of the trip generation statistics available for convenience stores from this source.

The current edition of Trip Generation also provides daily vehicle generation data. The differences in trip generation rates between the various convenience store classifications shown in Exhibit 8 may be used to calculate the difference in customer counts and sales levels when different configurations are being compared. For example, it can be argued from this data that the loss of the fuel service in an eminent domain condemnation proceeding may reduce evening rush hour customer counts by 42% from 59.69 (Code 853) trips to 34.57 (Code 852) trips.

Traffic engineering firms provide detailed traffic analysis of specific sites as well. For proposed convenience stores, the owner may have already completed these studies as part of loan application requirements. These reports are a significant help to appraisers because they can be used to estimate the subject's potential capture volume based on certain models employed by the traffic engineer. Once an appraiser knows how many customers will enter the subject site, estimating gross sales is simple. Numerous proprietary firms provide traffic and demographic data for locations in the United States. Traffic studies and customer capture rates can be obtained from transportation engineering firms and local planning officials.

Traffic engineering firms provide detailed traffic analysis of specific sites as well. For proposed convenience stores, the owner may have already completed these studies as part of the loan application process. These reports are tremendously useful because they can help the appraiser estimate the subject's potential capture volume based on certain models employed by the traffic engineer. Once an appraiser knows how many customers will enter the subject site, estimating gross sales is simple. Numerous proprietary firms provide traffic and demographic data for locations in the United States. Traffic studies and customer capture rates can be obtained from transportation engineering firms.

Traffic Capture Rates

Convenience store operators frequently project traffic capture rates for the locations of their stores. Traffic capture rates are a percentage measure of the number of vehicles entering the site from the passing vehicle traffic. Retail pricing is the single most important factor that impacts traffic capture rates. Lower-priced gasoline attracts more customers and increases traffic capture rates. However, other factors such as visibility and ease of access play an important role when pricing is held constant.

The relationship between traffic volume and traffic capture rates for a particular site is generally inverse. Higher traffic volumes usually result in lower traffic capture rates. This can be explained by several causes. Higher speeds are usually associated with higher traffic volumes. For example, traffic volumes of 50,000 to 100,000 vehicles per day are typical of freeway traffic and speeds greater than 50 miles per hour. Drivers in this type of traffic are less likely to make impulse decisions to stop at a convenience store than drivers in slower traffic. Higher traffic volumes are also associated with destination travel rather than commuter or local travel. This inverse relationship between traffic volume and traffic capture rates is illustrated in Exhibit 9. The y-axis shows the average traffic capture rates associated with various traffic volumes shown on the x-axis.

A study conducted by the author demonstrates that traffic capture rates can be projected when the traffic volume is known. The equation for this relationship is:

y = 27.901 [x.sup.-0.738]

where:

y = the traffic capture rate

x = traffic volume

[GRAPHIC 9 OMITTED]

The coefficient of determination ([R.sup.2]) in this study is 53%. In this real-world study, traffic volume alone accounted for 53% of the variability in capture rates among the locations. The locations included many different brands as well as different retail pricing, so in this regard the coefficient of determination is quite high.

To predict gallonage using this equation, let's assume that the traffic count is 10,000 vehicles per day. We can then solve for y as follows:

y = 27.901 x [10,000.sup.-0.738]

y = 27.901 x 0.00112

y = 3.1%

The estimated traffic capture rate is 3.1%, so the subject site can expect 310 customer visits per day. From this customer capture rate, gross sales can be estimated using industry data from sources such as the NACS State of the Industry annual report. Continuing with this example, assume the average customer transaction (motor fuel and in-store sales) is $8.00. Multiplying the average customer transaction of $8.00 by the 310 projected customer visits per day equals $2,480 per day of gross sales. The annual gross sales are therefore projected at $905,200 ($2,480 x 365 days per year).

Criteria for Undeveloped Sites

The development of land for convenience retail use poses special considerations. The following is a list of important questions that should be considered when evaluating potential sites:

* What is the site's size?

* What is the site's depth?

* What is the site's width?

* Is there frontage on a primary street?

* Is there frontage on a secondary street?

* Will the site need to be lowered?

* Will the site need to be elevated?

* Is there a building on the site?

* What is the current property use? (What type of business or building is currently on the site?)

* What is the current zoning?

* What is the zoning/use of the sites adjacent to the subject?

* Is there a natural source of water on or near the site?

* Is there a culvert or drainage ditch leading to a sewer system on or near the site?

* Are all required utilities (natural gas, electricity, water, and sewer) on the site?

* What utilities (natural gas, electricity, water, and sewer) are not on the site?

* If utilities are not available on the site, what is their nearest location?

* What is the probability of the site being contaminated?

* Does the site currently have street access?

* Has the owner been identified?

* Has the owner expressed an interest in selling?

It is possible to rate each characteristic numerically so that higher scores indicate the most favorable sites. When evaluating several potential sites, various thresholds can be used to recommend potential candidates for further consideration.

Contamination Issues

Contamination issues can be very costly, especially when groundwater contamination has occurred. It is not possible to determine definitively whether a property has been contaminated by visual inspection alone. Environmental testing is required, and this task is performed by qualified experts. However, the following visual clues indicate that a site may be contaminated:

* The property's current or past use included the retail sale, storage, or use of environmental contaminants (this includes use as a gas station or bulk chemical storage facility)

* Stained soil or stressed vegetation

* The presence of monitoring wells, which can usually be identified by their covers, or soil aerators

Many older petroleum-marketing properties are likely to have contamination problems, and federal stipulations aim to ensure that contamination is contained as much as possible. The deadline for bringing all underground storage tanks (USTs) in the United States into compliance with Environmental Protection Agency (EPA) standards was December 31, 1998. All older, leaking fuel storage tanks had to be replaced or decommissioned by that date. Today, all USTs are required to have monitoring equipment that alerts operators to problems.

Until the mid-1980s, most USTs consisted of bare steel, which corrodes over time and allows tank contents to leak. Congress banned the installation of unprotected steel tanks and piping in 1985. Today, all commercial retail and wholesale USTs--including all convenience store and gas station tanks--are federally regulated. Despite this regulation, more than 495,000 UST releases were recorded since 1989, when the EPA published Technical Standards and Corrective Action Requirements for Owners and Operators of Underground Storage Tanks in the Code of Federal Regulations. Additionally, the EPA estimates that there were still nearly 597,000 federally regulated USTs buried at more than 215,000 sites nationwide as of 2010. However, the number of releases continues to decline. In 2010, 6,300 new leaks were reported. Exhibit 10 shows a typical underground storage tank installation.

Contaminated UST sites vary considerably. Some are contaminated severely and have poor groundwater resources. Seriously contaminated sites require years of cleanup and remediation that can cost more than $1 million. Other sites may experience relatively minor contamination if only a small amount of the surrounding soil has been affected and no groundwater has been contaminated.

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According to the EPA, the average cost of a UST site cleanup is approximately $125,000. Both UST owners and operators can be held legally responsible for cleanup and liability costs. In 1986, Congress amended Subtitle I of the Resource Conservation and Recovery Act (RCRA) to create the Leaking Underground Storage Tank (LUST) Trust Fund. This fund was established so that the government could oversee site cleanup and finance the cleanup of contaminated sites when the owner or operator is unknown, unable to pay for the cleanup, or unwilling to respond. This regulatory initiative was funded by a 0.1-cent federal tax on each gallon of motor fuel sold in the United States. The EPA has delegated most of the regulatory programs to individual states, and most states administer their UST programs through their environmental quality departments. States have the authority to implement more stringent requirements in their UST regulatory programs than federal laws require, so UST requirements vary from state to state.

A lawsuit filed by the South Tahoe Public Utility District against Shell Oil Co. and two other defendants provides a prime example of how complex and costly UST contamination can be. The lawsuit focused on methyl tertiary butyl ether (MTBE) contamination of groundwater wells. The contamination was caused by USTs leaking from gas stations on the south shore of Lake Tahoe, Nevada. MTBE is an additive that the oil industry introduced nationally 20 years ago. At first it was perceived by environmentalists as a valuable substance that caused gasoline to burn cleaner and produced lower atmospheric pollution levels. However, MTBE has since been found to be a major environmental hazard because it spreads rampantly when mixed with groundwater. This often happens when USTs leak gasoline containing MTBE, and the contamination problem is widespread. California has 10,000 MTBE-contaminated sites, while New York has 1,500. The contamination in the South Tahoe case alone affected the drinking water of 30,000 residents. In 2002 Shell Oil Co. agreed to pay the South Tahoe Public Utility District $28 million in that lawsuit, and the total settlements awarded by the jury amounted to $69 million.

Contamination issues are complicated and costly. The typical appraiser does not have the knowledge or experience to assess contamination, so environmental ratings and comments should be sought from a competent third-party expert. The following is a list of suggestions for appraisers who want to perform due diligence without assuming extra liability:

* Ask owners about past and present contamination issues and about the presence of USTs on the property. However, keep in mind that this information alone is not sufficient to make any final determinations.

* Request from the owner-operator any environmental reports prepared by environmental inspectors or state regulatory agencies.

* Contact the department in the subject's state that has jurisdiction over contamination issues. This is usually the department of environmental quality.

The nearest field office will have records of contamination problems at the subject site and other areas of the neighborhood.

* Do not make broad qualifying statements in the appraisal report, such as "the site appears to be environmentally clean" or "no contamination problems were found"

* Complete an environmental checklist or audit if it is requested by a lender or client. Such forms typically ask for information regarding the condition of the subject site. Only record statements of what has been observed, and do not offer opinions. If a question cannot be answered sufficiently, simply state this.

When inspecting the site, be alert to indications of past environmental problems. Exhibit 11 shows the cap on a monitoring well. Monitoring wells are evidence of past contamination. These monitoring wells are used to observe the movement of contamination plumes. However, the presence of a monitoring well does not necessarily establish that the source of contamination is at the subject site. Monitoring wells can be installed at adjacent sites to track the direction and intensity of contamination. The store operator should be questioned about the reason for the presence of any monitoring wells on the subject site.

Air sparging systems and soil vapor extractors are also visible indicators of underground contamination. Exhibit 12 shows a soil vapor extractor. The pumping mechanism is above ground, often located at the rear or side of a convenience store site. The above-ground mechanism may be surrounded by a privacy fence. Again, the source of contamination may be off site.

Suggested Environmental Disclosure Statement

Liability insurance companies and issuers of errors and omissions insurance for real estate appraisers often give examples of limiting condition statements that pertain to environmental and contamination issues. Insurance companies advise appraisers to include these statements in their appraisal reports. Since convenience stores often sell petroleum products, which are a known source of environmental contamination, the appraiser should include a disclaimer in the report addressing these concerns. The disclaimer should inform the reader of the limitations of the appraiser's inspection regarding contamination issues. The appraiser may wish to include a statement such as the following in the appraisal report. This statement can be placed in the executive summary, assumptions and limiting conditions, or site data section of the report.

Summary

In this article, many convenience store criteria have been examined and examples have been provided to show how specific market participants rate a convenience store location. Today's convenience store business model requires that sites have excellent visibility, easy access, and sufficient land area to accommodate the forecourt, the building footprint, and on-site parking. Access and visibility are especially important to a convenience store's success.

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The cost of convenience store sites has increased steadily over the last 20 years. As a result, rising land costs are a major concern in today's convenience store industry. Fuel sales have historically led in-store sales in this industry, but with the entrance of mass merchandisers into the fuel sale business, that may be changing. Convenience store sales patterns may never be the same.

Web Connections

Internet resources suggested by the Y. T. and Louise Lee Lum Library

American Association of State Highway and Transportation Officials

http://www.transportation.org

Association of Convenience and Fuel Retailers

http://www.nacsonline.com

Convenience Store News

http://www.csnews.com

Oil Price Information Service

http://www.opisnet.com

Petroleum Marketers Association of America

http://www.pmaa.org

(1.) The percentage increases cited here are not compounded.

The material in this article originally appeared in Convenience Stores and Retail Fuel Properties: Essential Appraisal Issues, 2nd ed. (Chicago: Appraisal Institute, 2012).

Robert E. Bainbridge, MAI, SRA, has been a practicing appraiser for over 30 years. He is the developer and an IDECC-certified instructor for the Appraisal Institute's Appraising Convenience Stores seminar and has been a featured speaker at valuation conferences sponsored by the Appraisal Institute and the American Law Institute-American Bar Association. Bainbridge writes a regular column on real estate topics for Convenience Store News magazine, and his articles on convenience retail real estate have appeared in The Appraisal Journal, Valuation, and Right of Way. Bainbridge holds a master of science degree in real estate appraisal from the University of St. Thomas, and he was the recipient of the Appraisal Institute's 2004 George L. Schmutz Award. Contact: reb@cstorevalue.com
Primary market area. Clusters of grocery stores
   indicate that many local grocery stores are sharing the
   one-mile radius trade area used by convenience store
   chains. Thus, the actual trade area is about a 0.5-mile
   radius.

   Traffic. Impulse purchases make up a large percentage
   of convenience store sales, so high volumes of pedestrian
   and vehicle traffic passing a store is critical. Owners/
   operators should try to locate near schools, parks,
   sporting facilities, and other businesses (especially in
   strip malls) to increase traffic. They also should monitor
   seasonal traffic fluctuations in resort areas and carefully
   determine whether summer earnings can sustain them
   during slow winter months.

   Vehicle traffic count. Approximately 80% of convenience
   stores are located on major collector roads, which carry
   2,000 to 15,000 cars per day.

   Traffic speed limit. Ninety percent of convenience
   stores were located along roads with traffic speed
   limits of 30 mph to 45 mph. Traffic speeds should be
   high enough to be convenient but low enough to permit
   safe access.

   "Going-home" side of the street. The preferred
   location is on the side of the road where the afternoon
   traffic volume is heaviest so that many customers see
   the convenience store before reaching their homes.

   Convenience store competition. Although a
   convenience store's competition is mostly from other
   convenience stores, it can also come from supermarkets.
   Study all competitors to see if the local market can
   support another operation.

   Supermarkets and shopping plazas in the trade
   area. Other retail properties are an advantage because
   they increase the visibility of the convenience store.
   A location between the source of customers and the
   shopping center permits the convenience store to
   intercept some of the supermarket trade.

   A corner site. A corner location is preferred to one in
   the middle of the block because of increased visibility.

   Ease of ingress and egress. Easy ingress and egress
   makes it convenient and safe to shop at the store. (Stop
   signs, traffic lights, and raised medians will influence
   the ease of entry and exit.)

   Population density. The greater the number of people
   within a convenient distance, the higher the sales.
   Approximately 2,000 to 3,000 people are needed to
   support one store. The Grocery Trade Association states
   that to sustain a convenience store, between 500 and
   1,000 people must live within a one-mile radius of it. If
   people have to travel more than a mile, they are more
   likely to go to a supermarket for a major shopping trip.
   Check an area's future development plans and projected
   growth rates.

   Household density and type. Sales improve when there
   are large numbers of apartment dwellers between 18
   and 35 years of age and households of large families
   nearby.

   Employment and occupation. The major customer
   groups are white-collar workers (41%) and blue-collar-workers
   (34%). Housewives, students, and retirees
   constitute only 25% of customers.

   Family income. As an area's median income increases,
   sales decrease. Areas of middle income are best for sales.

   Population mix and age distribution. The main
   market consists of people aged 18 to 35 years (50%).
   If retirees are more than 10% of the market area
   population, sales are affected adversely.

   Automobile ownership. Two-thirds of the customers
   arrive by automobile, so the amount of auto ownership
   in the trade area is important.

   Age of houses. Local grocery stores tend to locate in
   areas that have houses 15 to 35 years old.

   Nearby schools. A convenience store should not be
   located in close proximity to an elementary school.

   Hours of operation. The busiest day of the week is
   Sunday, then Saturday. The busiest time of the day is
   between 3 p.m. and closing (up to midnight). This period
   accounts for 62% of daily sales.


The property has been used for the sale of petroleum
   products. The appraiser has not made a soil test or
   test of underground water. Identifying site and soil
   contaminants or environmental issues is beyond the
   scope of this appraisal and the appraiser's qualifications.
   Unless otherwise stated, this appraisal is based
   on the assumption that the site and property are
   uncontaminated and unaffected by environmentally
   hazardous materials or substances. No responsibility
   is assumed by the appraiser for contamination issues
   and no warranties are implied by this opinion of value.
   No consideration of existing or proposed regulations of
   the Environmental Protection Agency, nor any other
   government agency, has been made by the appraiser.
   No statement of the subject property's compliance or
   noncompliance with the regulations or requirements of
   any government agency has been made by, or implied
   by, the appraiser. The client is advised to obtain the
   services of qualified environmental services contractors.


Exhibit 1 Average Convenience Store Site Costs

         Urban       Rural

2000     $699,800   $259,400
2001     $671,300   $381,200
2002   $1,048,800   $269,000
2003     $929,100   $354,700
2004     $940,177   $490,819
2005     $836,714   $432,790
2006     $798,510   $764,570
2007     $847,608   $988,692
2008   $1,090,616   $597,564
2009     $919,932   $674,494
2010     $880,067   $647,991

Exhibit 6 Traffic Data Collected from Harney County, OR

                                Weekday   Percent   Daily     Percent
                                Traffic   of ADT    Traffic   of ADT

January                          1,592      67       1,487      63
February                         1,734      73       1,639      69
March                            2,087      88       2,056      87
April                            2,272      96       2,244      95
May                              2,496      105      2,470      104
June                             3,007      127      2,985      126
July                             3,088      130      3,138      132
August                           3,278      138      3,312      140
September                        2,893      122      2,934      124
October                          2,520      106      2,501      106
November                         1,986      84       1,966      83
December                         1,764      74       1,697      72

Vehicle Classification                                        Percent
Breakdown                                                     of ADT

Passenger cars                                                 39.30
Other 2-axle, 4-tire vehicles                                  40.00
Single-unit 2-axle, 6-tire                                     3.80
Single-unit 3 axle                                             0.50
Single-unit 4 axle or more                                     0.10
Single trailer truck, 4 axle                                   4.40
  or less
Single trailer truck, 5 axle                                   7.40
Single trailer truck, 6 axle                                   1.50
  or more
Double-trailer truck, 5 axle                                   0.00
  or less
Double-trailer truck, 6 axle                                   0.20
Double-trailer truck, 7 axle                                   1.80
  or more
Triple-trailer trucks                                          0.00
Buses                                                          0.50
Motorcycles & scooters                                         0.50

Source: Oregon Department of Transportation, www.oregon.gov/ODOT/

Exhibit 7 Selected Transportation Trends (March 2010)

Location: US30; MP 37.70; LA GRANGE-BAKER HIGHW
NO. 66; 4.84 miles south of Union-Baker County Line

Site Name: North Powder (01-001)

Installed: October 1957

                             Percent of ADT
           Average
            Daily    Max   Max    10th   20th   30th
Year       Traffic   Day   Hour   Hour   Hour   Hour

2001         837     --     --     --     --     --
2002         879     181   18.3   13.5   12.6   12.1
2003         911     --     --     --     --     --
2004         823     160   23.7   12.4   11.8   11.4
2005         759     180   26.2   13.7   12.8   12.0
2006         737     181   16.5   12.9   11.9   11.5
2007         779     182   17.0   12.6   11.9   11.6
2008         722     177   22.7   14.3   12.6   11.9
2009         757     297   80.1   13.1   12.3   12.0
2010         778     194   34.4   14.9   13.1   11.8

                     2010 Traffic Data

            Average             Average
            Weekday   Percent    Daily    Percent
Year        Traffic   of ADT    Traffic   of ADT

January       700       90        629       81
February      740       95        704       90
March         790       102       743       95
April         832       107       795       102
May           876       113       835       107
June          943       121       980       114
July          941       121       939       121
August        927       119       875       112
September     914       117       861       111
October       838       108       794       102
November      727       93        606       78
December      667       86        606       78

                    2010 Traffic Data

                                                      Percent
Year        Classification Breakdown                  of ADT

January     Motorcycles                                0.17
February    Passenger Cars                             52.33
March       Light Trucks                               24.76
April       Buses                                      0.17
May         Single unit trucks (2 axles)               14.37
June        Single unit trucks (3 axles)               0.96
July        Single unit trucks (4 or more axles)       0.00
August      Single trailer trucks (4 or less axles)    4.55
September   Single trailer trucks (5 axles)            0.90
October     Single trailer trucks (6 or more axles)    1.01
November    Multi trailer trucks (5 or less axles)     0.11
December    Multi trailer trucks (6 axles)             0.00
            Multi trailer trucks (7 or more axles)     0.67

Source: Oregon Department of Transportation, www.oregon.gov/ODOT/

Exhibit 8 Trip Generation Statistics for the R M. Peak Hour

Code   Description                         Unit of Measure     Trips
                                                              per Unit

851    Convenience Market (Open 24            1,000 SF         52.41
         Hours)
852    Convenience Market (Open 15-16         1,000 SF         34.57
         Hours)
853    Convenience Market with Gasoline       1,000 SF         59.69
         Pumps
944    Gasoline/Service Station           Fueling Positions    13.87
945    Gasoline/Service Station with      Fueling Positions    13.38
         Convenience Market
946    Gasoline/Service Station with      Fueling Positions    13.94
         Convenience Market and Car
         Wash

Source: Trip Generation: An ITE Informational Report, 8th ed.
(Washington, D.C.: Institute of Transportation Engineers, 2008).
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