Dealerships, News

CAR dealerships in the UK are in big demand according to UK property advisors Rapleys. Categorised in the UK property market as money-making niche assets for property investors, car dealerships top of the list.

Rapleys latest Alternative Assets report looks at trends in performance, outlook, challenges and opportunities across 16 niche sectors including automotive, drive through, roadside and self storage. Ripleys found that automotive and roadside came out on top. 

But the sector is not without its challenges; especially in the area of building costs for showrooms and the strength of structures facing increased loads from heavier EVs.

The report, while limited to the UK, provides an insight for Australian dealers and other investors to real estate market trends in a market that, in automotive retailing terms, is remarkably similar across the antipodes and shares similar opportunities and problems.

Rapleys said the outlook is strong for car dealerships from a valuation and demand perspective, although there are definitely significant challenges. 

For example, the buildings are largely made of steel and glass, two of the most expensive build materials, with the highest inflationary increases over the past three years, according to the UK’s Building Cost Information Service. 

Sustainability is also seen as a tricky issue for dealerships as they require a much higher level of both heating and cooling and light/power and this makes it more difficult for them to meet building emissions targets. Operationally meeting these requirements will represent a big cost that will not see a payback, the report said 

Daniel Cook, head of automotive at Rapleys said that savvy operators would be making sustainability improvements when they are refurbishing their dealerships. 

“In many towns and cities, dealer groups and manufacturers are considering opportunities to multifranchise (essentially a department store model). 

“The reason for this is because of the need to showcase a quantum of cars and, with land scarce and pricey, the only way may be up and we have seen a number of multi storey dealership facilities in recent years.

“This brings some challenges. For example, with the wider uptake of EVs which are significantly heavier (for example, 100 ICE 3 series replaced by electric cars weigh the equivalent of six double decker buses more than typical fuel models).

“Upper floors and decks may need to be stress tested if built originally for a typical ICE car load.

A lot of work also needs to take place underground for car dealerships, especially if stacking up more floors.

“This is not just because of the foundations but also with the move to EVs, new substations may be required,” Mr Cook said.

Rebecca Harper, head of investment in Rapleys commercial division said: “The shift to an agency model for bigger dealers will help solve the issue of storage as car stocks are held centrally.  This model has been beneficial to dealer groups because of centralised infrastructure: marketing, finance and procurement.

“It remains to be seen if this works where local demand is particular to the preferences of its specific catchment,” she said. 

Ms Harper said that another trend to watch out for is the move to mobility as a service (MaaS) which is the on-demand use of cars with integrated OS via an app. 

“Users hire a car local to them from a ‘car club’ or via an app that downloads all the user’s favourite settings to the vehicle.  This allows people to effectively use the car as if it’s their own but without any ownership or leasing responsibilities.”

She said that historically the alternative to car ownership was public transport journeys, but “MaaS has evolved into a rising trend in automotives with some commentators questioning if it will be the end of private car ownership”. 

“While we don’t believe this to be the case, it will undoubtedly have an impact on the requirement for second cars.” 

Ms Harper said that the biggest trend in the automotive industry “is undoubtedly the volume of M&A and new international entrants to the UK. Lookers have recently been taken over by Alpha Auto Group, a new entrant to the UK, and Lithia Motors are continuing to build upon their purchase of Jardine Motors with their recent acquisition of Pendragon to create the second largest group in the UK. 

“Why are these big acquisitions happening? 

“Because the UK is the place to be for cars: we are still seen as part of Europe and the new Chinese firms like BYD, NIO and Chery will come to the UK/Germany in the first instance and then the rest of Europe. 

“Electric car brands like Fisker are also scaling up over here: UK consumers are still buying cars – both old and new and EVs are on the uptake,” Ms Harper said. 

“We predict that the core conurbations of London, Birmingham, Manchester and Edinburgh will lead the way for existing dealers and new entrants alike.”

By John Mellor

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