Retail Gas Station Tanks in Texas (Future Planning)
Hello Everyone,

I've been a commercial property manager for a small firm with over 10 years experience in light industrial. This is our only retail location. It has great access to a major freeway and services the residential neighborhood. 

Am lacking skills in projecting future costs on gas station replacement costs and what to expect. Could really use some insight on planning and your personal opinions.

Current Tenant: 3,000 sq. ft. with a strong tenant (Circle K) with 4 pumps.

Original tanks were installed in 1980 and were relined in 2003. 

Their lease is due to expire in 2024 and want to be in a strong position to renegotiate or cover a portion of replacement costs if necessary. 

With the age of these tanks, they will be pushing 45 years when the lease is due. 

My concerns are the future outlook on gas pumps for the foreseeable future. With European nations and California looking to phase out gas vehicles in the next 20+ years, will this tenant even want to put in the cost of removing and installing new tanks for only half of its useful life? Am basing this on the possibility of electric vehicles being introduced around around 2040. Its a personal opinion based on what I have been reading the past year or so. There is a huge push and have no idea how Texas will move forward, but being prepared for anything in the real estate industry is a must. 

What would a healthy monthly maintenance reserve look like? Am thinking maybe $1,500 per month for the next 48 months to get to $72,000.00 to be able to negotiate splitting the replacement cost. 

Even if vehicles transition to electric, what will future convenient gas pumps look like? Fast charging stations with more electrical requirements rather than gas tanks? Or a hybrid of some gas tanks and some electrical charging stations? 

If anyone has any experience in this planning or calculating gas tank replacements, would love to hear what a healthy financial expectations is on replacement costs. Or, if anyone has an industry experience on what the major players are planning for the future, it would be awesome to try and get in on the conversations before the technology creeps in at a very high cost.

Bonus points for any more study or reading material is greatly appreciated. 

Thank you all so much and I hope everyone is hitting he streets and getting creative with clients during these times. It has been a very interesting year.
[{"id": "g8si3ef", "text": "Convenience stores as a category aren't going anywhere. They have their best margins on the soda, alcohol, tobacco anyways, not the gas. The gas is there to get people in buying everything else. so will they start transitioning to high power chargers? Yes. I've seen wawa's with tesla superchargers. They will sell gas for a long time though, especially in a place like texas because sure as shit they won't have california EV mandates.", "replies": [{"id": "g8sjh73", "text": "Great response. Texas sure does like to keep things the way you described. If it ain't broke, don't fix it. Ha.\n\nWill dig more into the wawa's with tesla supercharges. \n\nAgree that Texas as a whole is probably not going to make moves for a long time. Will still start stashing cash anyway to budget for a tank replacement.", "replies": [{"id": "g8sl08h", "text": "The key I think for electric charging at gas stations is you need more than just chips and soda. Charging takes longer even with the really fast chargers like tesla has. The customers may stick around 30min to an hour. That's why tesla puts chargers in places where there is something to eat and do, often times at malls. If you have enough room to put an integrated subway/pizza hut/taco bell or something it'll help.", "replies": [{"id": "g8t1soi", "text": "Another really good point. Will def. Think on this more.", "replies": [], "depth": 4}], "depth": 3}, {"id": "g8t57og", "text": "My opinion is that mandates are not going to be driving the adoption.  I think we will see it happen organically before the mandates come into effect.  \n\nThe thing to think about with superchargers is that with EV's something like 95% of charging is going to be done at home.  Superchargers are mainly for longer distance trips and people who don't have charging at home.  \n\nAnd it's not really an efficient use of space to convert a gas station to an ev charging station since all that's required are parking spaces, it makes more sense to just use spaces in an existing strip mall where people can to go starbucks ect while they charge.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g8snyci", "text": "New gas stations still going in all over the place surprisingly.  They will probably renew.  If not try to sell their operation to someone else or run it yourself.", "replies": [{"id": "g8t381q", "text": "Even if the owner does approach selling this property, think a healthy reserve fun for after the renewal would be appealing to potential buyers. Seeing a stash of cash ready to use in working with the removal and replacement is always a strong stance.\n\nHave the lack of what these replacement cost look like and what is expected of owner and tenant with absorbing the cost through the lease renewal process. \n\nWould like to try and improve the property with trying to convince the owner that if they take steps today, a few years from now a big capital improvement (if the tank removal is even considered this tax wise) would increase the entire property value for selling. \n\nGot to figure the true cost and how to plan. Is a challenge with my lack of construction experience of these gas tanks. \n\nThank you for the response.", "replies": [], "depth": 2}], "depth": 1}, {"id": "g8ssu94", "text": "how can you phase out gas vehicles in 20 years? is the state helping the lower income switch from clunker cars to EV? EV is hardly affordable to a lot of people. imo, a new gas tank would be able to get its full life usage when replaced.", "replies": [{"id": "g8szs8h", "text": "EV's are getting cheaper on a tech-like scale.  Meaning in just a few years EV's will be cheaper than gas cars.  They are the future, it's \\*really\\* clear.  The only question is how long will it take.", "replies": [{"id": "g8t29oy", "text": "Regardless of my personal opinions, time has shown again and again the exponential growth of technology. Am taking the approach to think deeply on how the future will become innovated with the introduction of electric vehicles.\n\nSeeing how these bigger companies are being mandated by Europe to implement an electrical vehicle transition, it presents the question of if this new model will be easy to implement the States and what the rest of the world with do. \n\nTimes are changing and am really enjoying this conversation with everyone.", "replies": [], "depth": 3}, {"id": "g8uixeu", "text": "yes i agree they\u2019re cheaper. just a few years? doubt it. at least a couple decades. ev constantly has new tech but you forget the fact that it\u2019s just not obtainable for half the population. there\u2019s more low income people in the US than you think. buying a new (even used) EV wouldn\u2019t be feasible unless there\u2019s some sort of stimulus offering a lot for their beaters. yes it\u2019s the future. soon? doubt it. and i LOVE EV, picking up a taycan soon myself. but i\u2019m just being realistic.", "replies": [{"id": "g93h3d7", "text": "Am leaning more to your beliefs in looking at this as a business financial equation. Having a majority of the population hesitant to transitioning to fully electric is for best financially (in terms of this property and its major concern). Especially in the low income families.\n\nFrom the other comments am beginning to see the pattern of, yes it is here, but it will take time. And this is exactly what information I can provide to the owner. Deciding to replace and upgrade the gas tanks will make it more valuable now with the goal of trying to sell in the next decade would be a decent sweet spot.\n\nThe ability to have a newer product (although being phased out over YEARS rather than months) is always a better stance.\n\nToo many business have a successful model and are being eaten up by change and innovation. IT's hard to earn a living with the world changing so quickly it seems.\n\nReally appreciate you and your insight. This is a great community to have a healthy conversation and exchange of ideas. Best of luck to you.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g8t0utg", "text": "I would sell it while you still can.  \n\nThe future is 100% EV.  The timeline is the only question.  The thing is, the tech is all already invented to make it happen.  EV's have turned cars into a tech product, and along with it the continuous improvements and lower prices that tech products have.  I'm of the opinion that EV adoption curve will probably look very similar to the smartphone adoption curve.   \n\nPeople look at the CA 2035 mandate, but at the rate the tech is advancing we'll likely be there quite a bit sooner.  I would expect 80%+ new car sales EV's in CA in 2030 and 50%+ nationally.", "replies": [{"id": "g8t4fci", "text": "It is going to be an interesting. Like, what will these gas stations all turn into? Will they be hurting similar to how big shopping malls are today? Or will these small neighborhood service stations (such as this one) find a way to turn the locations into something else. \n\nAm getting off topic a bit, but feel beginning these conversations with my fellow real estate professionals is a healthy approach to what we will all be facing in the future. \n\nRegardless of my opinion on selling, it it up to the owner. The property is not solely a gas station but an entire neighborhood destination with seven tenants. \n\nAppreciate your input and I too have a feeling these large single tenant gas stations will be facing a very challenging time in the next 15 years or so.", "replies": [{"id": "g8t6cfv", "text": "I think you'll slowly start to see values drop.  And the drop will accelerate as EV adoption accelerates.  They will be hurting, absolutely.  It won't be like malls, because once someone buys an EV they are done with gas forever.  People still go to Macy's to buy clothes or a restaurant around the mall to eat.  \n\nI think it depends on the area.  In expensive areas with desirable real estate they may turn into drive through fast food or starbucks ect.  In cheaper areas I don't know.  There is a cost to the cleanup and removal of the tanks that may make them have negative value in many areas.", "replies": [{"id": "g8t7jby", "text": "Another really good point. Malls have versatility where as gas stations are more restricted. Its always a struggle of retaining value while not letting expenses exceed the initial investment. \n\nIf your thoughts are on the same trajectory as the smart phones it is going to change alot of our built enviornment.", "replies": [], "depth": 4}, {"id": "g8zwufn", "text": "&gt; I think it depends on the area. In expensive areas with desirable real estate they may turn into drive through fast food or starbucks ect. In cheaper areas I don't know. \n\nI could somewhat seeing them stick around in the cheaper areas too because those are where adoption will be slower of EV and at home charging is going to be much more complicated.  If you have a 3500 mc mansion in the burbs and get an ev you will just get a charger.  If you have a studio apartment in a questionable area with on street parking your options to charge are going to be a lot more limited.\n\nKinda funny to think about.  Gas stations/charging stations may wind up being like pay day lenders and laundrymats where they are mostly in crap areas", "replies": [{"id": "g93hqev", "text": "Exactly, and how many small company apartment owners are facing deferred maintenance and continual updated building codes. \n\nReally see this taking place over a generation so to speak. Once it is in motion though, it will only build momentum sooner than later. \n\nAs a thought am thinking of keeping a tab on the major vehicle manufactures and assembly plants. If there is news to see how much of their production of electric tips to over say 45% or 50% of their builds it would be a big indicator of the direction of change. Hmmmm...", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g9s94jk", "text": "Need help with lowering overhead cost when it comes to insurance, risk, etc etc. I have a contact with a strong suit for multiple gas station franchises \ud83d\ude0f", "replies": [{"id": "g9x3usk", "text": "Thank you. May touch base in the future should things get hairy.Have learned alot since my original post from other professionals. \n\nApparently this tenant set up a trust when the tanks were installed to cover the removal and upgrade. Am working with negotiating for this update to happen with them covering all the costs, clean up, and necessary closure letters in the event of any leakage.\n\nPer the lease agreement it is their responsibility, and am working to angle to tackle this project as soon as possible. Especially with the economy a bit slower. Now is the perfect time to push and get this task handled. \n\nI fully intend to post an update in the next coming months about my experience and educate everyone here. \n\nReal-estate and its improvements are similar to driving a big barge. Takes a while to get things moving. \n\nThank you for the offer and always enjoy connecting with other professionals.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gadr9d3", "text": "This product type is in high high demand right now. With a renegotiated lease, has your group ever considered selling?", "replies": [{"id": "gaeuavv", "text": "No clue what the owner wants to do. My role is to stay neutral and take a good look at what could do with improvements to position them in the best possible path. Am def. angling to get a bonus if I can make this thing work with making major improvements with minimal cost and increasing the property value/resell value.\n\nDon't think they will have any trouble selling when or if they decide.", "replies": [], "depth": 2}], "depth": 1}]