Oil is thicker than water

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Nick Selmes
EMEA Upstream Sustainability Services

What would most real estate professionals say was the largest sustainability risk affecting the value of a location? My experience is that typical answers would be likely to focus on environmental events such as increased flood risk and other issues arising from projected changes in our climate. 

However, will these responses shortly be joined by another locational risk, which is slowly gaining traction in terms of its importance? Namely, how increasing petrol prices will impact on discretionary driving choices and thereby locations dependent on these consumers.

This hypothesis is based on the period in summer 2008 when rising oil prices pushed average petrol prices in the UK to around £1.20 a litre.

At the time it was noted by various sources, including Sir Stuart Rose at the British Retail Consortium conference in May of that year that the decline in reported footfall was considerably less for high street than out-of-town locations.

As it happens the global recession and consequent fall in oil prices meant that this impact was short-lived. This allowed the industry to overlook the perceived high elasticity of demand between consumers shopping habits and rising petrol prices.

However, with petrol prices back at a similar level to 2008, impacting the valuations of out of town locations?

Increasingly it appears that the two parts to this equation are taking shape with petrol sales declining at a significant rate and evidence is beginning to emerge that this is affecting patterns of retail behaviour.

Watching how this issue develops and starts to impact on value is going to potentially be as intriguing as looking at those flood maps…

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