Most auto dealers are consummate entrepreneurs. They have an expert grasp of complex sale dynamics and keep their fingers on the pulse of emerging industry trends. As it relates to real estate, however, their expertise is understandably more limited.
When it comes time for dealers to relocate, expand or open a new franchise or capitalize on a market opportunity, there are specific market dynamics and location-specific considerations that need evaluating.
That’s when understanding the real estate component of the business becomes essential. This isn’t a topic that gets discussed often, but it’s important.
Successful auto dealers are nimble, responsive and solution-driven. They are typically well-connected and tend to dive into real-estate opportunities.
The consequences of hasty or poorly researched decisions can be sobering. Real estate is one of the largest and most expensive components to most businesses, and seemingly small missteps can carry disproportionately large bottom-line implications.
With that in mind, here are the key issues, priorities and best practices for automotive property owners to keep in mind while seeking out new real-estate opportunities:
Find an appropriately zoned piece of property
Once you’ve identified a site that meets both dealer expectations and manufacturer requirements (especially demographics and competitive/synergistic considerations), the first big step in the evaluation process is understanding the zoning dynamics. Plenty of property appears great, but once you look closer to determine if a property is appropriately zoned for your use, things can get complicated.
If the zoning doesn’t align with your needs, make sure you understand any rezoning or re-entitlement requirements and what is involved in working with the municipality to secure a conditional use permit or another viable solution.
Investigate landlord sentiment
This is one more box to check before moving forward. Even if a property is zoned appropriately, some landlords just don’t want automotive operations. Avoid wasting time and money on attorneys, letters of intent, lease negotiations, purchase agreements, etc.
Determine if the site is viable first. And, if not, figure out what it will cost and how complex the resolution process will be.
Understand the market
Different municipalities have specific (and very different) ideas or conditions about where automotive can and should be. Market dynamics in real estate are forever changing. In the current competitive marketplace, time is of the essence. Identifying a piece of property as soon as it hits the market, negotiating effectively with the owner and executing a successful transaction in a timely manner saves money and capitalizes on opportunities.
Secure expert counsel
Experts who specialize in automotive dealer real estate can provide a clearer picture of site suitability and internal market dynamics as well as clarify practical implications. (Wards Industry Voices contributor Jodi Meade, below left)
Market specialists who understand your business model are invaluable resources. They can coordinate your preferences and priorities with what’s going on in a specific market. They can factor in pricing trends, rental rates, land prices, building values as well as the nuances and complexities of zoning, entitlements and approvals.
Then you can make an educated and strategic business decision. Specialists in this space often know expediters who work directly with cities to navigate regulatory speedbumps and move the process along.
Experts may also have access to creative opportunities dealers may not have even considered. For example, as more real-estate developers have recognized the appealing stability and valuable co-tenancy potential of dealerships, intriguing new spaces are coming in retail and mixed-use projects.
Ultimately, in a competitive environment where speed to market is so important, understanding where issues lie and how to address them efficiently is the definition of a difference-maker.
Jodi V. Meade leads Avison Young’s Automotive Properties Group focusing on the automotive industry’s real-estate needs and services. She can be reached at [email protected]