2015 has seen the largest ever volume of automotive investment transactions, with around £650m expected to transact by the end of the year, according to the new Automotive Capital Markets Report.
UK institutions continue to dominate investment activity, accounting for 90% of the total market over the last five years, although new buyers include overseas Private Equity firms and US REITs who have been increasingly active in the car dealership market.
Automotive capital values have comfortably outperformed the wider market, rising by over 50% since 2010. Looking forward, car dealerships let to major dealer covenants are forecast to be the star performer in 2016 showing capital growth of 90% since 2010.
Due to the weight of money being invested by UK institutions and overseas money, investment yields are being driven down, with dealerships let to manufacturers selling for yields of 4.5% and below.
Key market activity includes the acquisition of 73 dealership investments let to Pendragon by WP Carey for £230.5m, Antin Infrastructure Fund’s acquisition of Service Area operator Roadchef for £153m, and MFG’s £200m purchase of Murco’s retailing arm of 228 petrol stations.
Knight Frank Automotive team forecast that 2016 will see further records broken in terms of investment activity on the back of a strong occupational market. In addition, there are likely to be further high profile corporate acquisitions which will potentially change the landscape of certain automotive sectors.
Adam Chapman, head of automotive, Knight Frank, commented: “2015 has been an exceptional year for the automotive sector, and there are no signs of this slowing into 2016. Given the forecast growth in rental and capital values, automotive property continues to offer genuine value against other ‘alternative’ sectors. We expect annual transaction volumes to surpass £1bn by 2020.”