Major investment in the automotive property market has returned the sector to pre-recession activity levels, according to roadside specialists at Colliers International.
Will Jolly, who heads up the Automotive Team across the West, said manufacturers and their dealers are jostling for the best roadside locations with limited supply of investment properties sharpening competition.
He said: “There are a number of factors which have come together to put this sector back on its feet after the downturn, these include low interest rates, fast improving car sales and pressure from manufacturers for modern, accessible facilities.”
“New vehicle sales in 2013 were up 10.8 per cent on 2012 and March 2014’s figures were up 17.7 per cent on 2013 figures this have given everybody confidence and continues the growth of the dealer’s covenants.
“The strong trading locations and increased size of these facilities give comfort to the investor that alternative uses will be attracted at the end of the lease.
“These factors have encouraged institutional investors to regard dealerships as an asset class with a demonstrable market from which to reference rental levels.
“The ability to sale and leaseback has encouraged dealers to recover the cost of the real estate and on occasion make a development profit whilst at the same time improving their return on investment from trading activities.”
He concluded: “Investors who have held vehicle dealerships for some years have benefited from significant ‘yield compression’ as the market has improved over the last couple of years which has encouraged them to “cash out” and book the profit.
The Automotive and Roadside team within Colliers International have acted alongside their Specialist Investment colleagues for numerous manufacturer, dealer group and investor clients on both the sales and purchasing side.
Colliers International’s Automotive team has scored major successes across the West including the fast establishing new showroom hub at Matford Green Business Park, Exeter – where planners have just approved a 35,000 sq ft car dealership for Volkswagen and are considering a further application for Toyota/Lexus and at Reading where they helped secure a major facility serving BMW and MINI.
Will Jolly said: “The Reading transaction is the largest single vehicle dealership investment transaction that we are aware of for some years. We acted for a major dealer group in a forward funding of their new BMW/MINI facility for the town and surrounding areas, which achieved a record yield for a dealer group covenant of sub 5%.
“We are just coming to the market with vehicle dealership investment opportunities in Bristol and Northampton where we expect competition to be particularly keen.
“On the occupational side we have are receiving a significantly increased level of enquiries for the plots at Matford Green from good quality manufacturer and dealer operators. Competition is hotting up for plots on this 27 acre park.
“We have acted for buyers and sellers or provided valuation services in this increasingly active market and estimate that we have been involved in one capacity or another, with about half of the investment transactions that have taken place over the last few years.
There are portfolio managers with funds immediately available, specifically looking for this type of property and as long as that remains the case and the “perfect storm” continues we will have a buoyant market in this sector.”
