Oil companies buying up corner lots for new stations: stations have car washes, fast food outlets and more.

Stations have car washes, fast food outlets and more

Just a couple of years ago, you almost couldn't give away a street corner in Southern California.

The gas stations had sold the corners to mini-mall developers in the 1980s, and by the 1990s many of these mini-malls were vacant or belly-up.

Lately, though, these properties, especially corners with lots of traffic, have become white hot.

The major oil companies, and some of the independents too, have been quietly but aggressively buying up corners to build their new, bigger modern gas stations, according to local retail real estate brokers.

But forget the old service station on the 22,500 square foot lot. Mobil Corp., Texaco Co., Atlantic Richfield Co., Shell Oil Co. and Unocal Corp. are in the market for 30,000- to 60,000-square-foot lots to build their new service stations.

And these are far from just gas stations. Many have a fast food restaurant (preferrably a "drive-thru") with a brand name, such as McDonald's or Taco Bell. Some are planned to have car washes, frozen yogurt and dry cleaners.

"You have these corner sites that nobody wanted for years, and now you have bidding wars," said Larry Fischer, managing director for corporate services for CB Commercial Real Estate Group in Los Angeles.

CB Commercial has been hired by Texaco to buy up about 50 sites of 50,000 square feet each in Orange, Riverside and San Bernardino counties, Fischer said.

"I know of a site where Mobil had offers in, and Texaco came in and beat the offer that Mobil had made. And Texaco demanded that the owner make a deal then and there and sell it to them. And Texaco won." Fischer related.

In the next few years, the larger, more modern gas stations with "drive-thru" restaurants attached are going to replace the service stations of old, Fischer said.

Brad Pearl, senior vice president at Capital Commercial Real Estate in Encino, has been hired by Mobil to find "nine excellent locations" in Southern California for 40,000- to 50,000-square-foot stations.

"It's kind of ironic," Pearl said. "A couple of years ago, we were tearing down gas stations to build mini-malls, and now we're going the other way."

The oil companies have been quiet about their move into big gas stations.

"Everybody knows we're growing, but we don't want to talk about it," said Scott Loll, spokesman for L.A.-based Arco.

Loll acknowledged that Arco was looking at building new stations with Taco Bell and Baskin Robbins as partners, but declined to say more, for "proprietary" reasons.

Unocal Corp. officials did not return repeated phone inquiries.

USA Petroleum Corp., an Agoura Hills-based gasoline marketer, is planning to open two new super-stations in L.A. County by the end of the year, said William C. Stewart, vice president of real estate.

"I'm not at liberty to tell you where they are," said Stewart. "When the market is good and the area is good ... you don't share that in public with anybody and give notice to the other oil companies."

Stewart said USA plans to build eight to 10 more super stations - with a convenience store and perhaps a car wash or fast food outlet - in the next few years.

The new stations will cost more to build - about $1 million, compared to the $280,000 typically spent in the 1970s, he said.

In the last two years, Taco Bell has opened or is in the process of opening 30 new outlets connected to gas stations in Southern California, said Laurie Gannon, spokeswoman for the Irvine-based fast food chain.

She noted that oil companies want to serve food at gas stations, but need a company with experience in the food service business. "They have dabbled with food, but they are in the gasoline business," she said.

Alvin Silber, oil analyst with Heine, Herzog & Geduld in New York, said one reason oil companies are pushing the new superstations is to grab a bigger piece of the retail gasoline market.

Oil companies make more money on retail sales than wholesale sales, he said. Refining margins - the difference between the cost of making gasoline and the price of selling it - have been higher on the West Coast in recent years.

"The trend is to move into high-volume, self service in partnerships with people who will bring in more traffic," he said.

"The only disturbing thing about this is all these oil companies are doing the same thing at the same time, and you can end up with overkill," he noted.