motortrader - automotive property · august2014 august2014 60 special focus property particularly...
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This month we’re delighted to highlight two key industry events which should engage the car retailing sector over the coming months.
Firstly, we’re delighted to launch Motor Trader Unsung Heroes 2014, the second annual industry-wide search for the best HR specialists, receptionists, service advisors and workshop technicians. Once again we’ve joined forces with Peacock Recruitment to run the event and have added an award for the best newcomer.
To find the best contenders in each category we need your help. Simply nominate your star performers and we will consider them for this year’s event. See page 8, or visit the Events section on www.motortrader.com, for further information.
We are also pleased to bring you details of the ASE/Motor Trader visit to the 2015 Nada Convention in San Francisco next January.
As the biggest dealer event in the world the Nada Convention has built a well deserved reputation over the years among UK dealers as an essential forum for best practice ideas. Delegates joining the ASE delegation, the biggest visiting from the UK, also benefit from a pre-Convention briefing, workshop debriefing sessions and a guided tour of a local dealership. More details can be found on page 10 but we urge you to book as soon as possible as places are limited.
Finally, it’s sad to report that Unipart Automotive has collapsed, resulting in the loss of over 1,200 jobs. The business, which was sold by Unipart Group to H2 Equity Partners in 2011 was expected to benefit from renewed focus and investment.
Sadly, just three years on, it has not worked out. While the news of Euro Car Parts, Andrew Page and the Parts Alliance acquiring 60 branches between them is welcome, especially for the staff employed, the collapse of Unipart Automotive, in an expanding car retailing market is disappointing.
Curtis Hutchinson, Editore: [email protected]: curtis_hutch
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John Kirwan
It’s looking good. New vehicle sales are booming, the used car market is thriving and dealers are performing well across the board. This is being reflected in the property market, which is experiencing rising levels of activity,
higher rents and further consolidation as some owner-drivers exit the trade.
According to Anthony Keohane director with Colliers International, as dealers have improved their fortunes, carmakers are now requiring them to upgrade premises or relocate.
“As the general economy has improved, motor manufacturers are seeking to reinforce their brand standards. In particular Jaguar Land Rover are imposing new standards upon their dealers, which have led to requirements for extensions and, in many cases, relocations.
“We have generally seen a higher level of property requirements than we experienced over the last five years and a number of relocations have been undertaken,” he said.
“Brands such as Skoda and Hyundai, who continue to grow their market share and who have historically traded from more secondary premises, are likely to require higher quality, larger customer facing facilities,” he said.
Paul Taylor, senior surveyor with GVA, is another who sees a more buoyant automotive property market having an impact on property and standards.
“We are encountering an increasing number of requirements. These are predominantly for relocations and, as they are principally for the more established brands, regularly constitute site criteria of two acres and above.
“The wider property market in the South East has improved radically in the last 18 months and the implications are being felt by dealers seeking viable opportunities. Land values are accelerating at an alarming rate,” he said.
But Taylor notes that the investment market for automotive property is strong. “The investment market offers manufacturers and retailers the opportunity to fund their relocations at very competitive yields. Even smaller covenants will now attract good interest as long as the properties are prime and ideally purpose-built for a prestige brand,” he said.
Tom Poynton, partner with Knight Frank also picks up on the willingness for investors to put money into dealership property. Demand is high.
“Activity is doubtless accelerating on the occupational side and especially in the capital markets. Arguably now more than ever, the industry is firmly on the radar for major investment funds, looking to expand their exposure to an area that offers good quality property stock, long leases and attractive covenants,” he said.
Phil Blackford, director with Rapleys has also noted an upturn in the property sector over the past year.
“The level of requirements for new facilities has increased substantially as dealers have consolidated their businesses and are starting to come under pressure from manufacturers to upgrade facilities or relocate. The prestige end of the brand spectrum has been particularly active with BMW, Audi, Mercedes-Benz, Land Rover and many others all having active requirements, or having acquired land upon which to build new facilities over this period.
“We see no sign that this level of activity is likely to diminish in the short to medium term with the inevitable result that values will increase,
STAR SIGN: Drayton Group’s new Mercedes-Benz dealership in Shrewsbury is the first in the UK to
feature the brand’s new corporate look
Rising demand The property market is seeing rising levels of activity as dealers look to upgrade premises while owner-drivers exit the trade
SPECIAL FOCUS Property
Automotive Property Consultancy (APC) recorded a 4% rise in automotive rents in 2013.
This trend has continued into 2014, according to APC managing director Bill Bexson.
“This is consistent with the continuing rise in new car registrations and the general increase in economic activity during the first part of the year,” he said.
According to APC research, rental values for retail property peaked in 2008 and have been falling ever since due to oversupply.
“Automotive property rents peaked later in 2009 and have proved more resilient to the downturn.
“Although they fell around 15% from 2009 to 2011 they have rebounded since,” said Bexson.
APC found there are significant differences in the performance of automotive rents across the UK.
“The best performance to the end of 2013 was the North, comprising North East, North West and Yorkshire and the Humber. This broad region has seen rents rise by around 30% since 2003.
“Greater London and the South East, by comparison, have seen a rise of under 20% over the same period, roughly the same as the South West and Wales,” he said.
Property rents on the rise
RENTAL GROWTH FLOURISHES AS CAR SALES CONTINUE TO RISE
At end of the first quarter of 2104 the 4% rise in rents recorded by Automotive Property Consultancy (APC) during 2013 has continued with rents rising 3% since the year end. This is consistent with the continuing rise in new car registrations and the general increase in economic activity during the first part of the year.Business optimism reached its highest level in more than two decades in January, according to a report by the accountants and business advisers BDO, holding out the prospect for accelerated activity in the market.
Figure 1 shows automotive rents indexed against the IPD Quarterly index of retail and retail warehouse rents rebased to 2004. This shows all three lines rising during the early part of the last decade (notwithstanding an adjustment to automotive in 2006). Rental values for retail property generally peaked in 2008 and has been falling ever since reflecting a structural oversupply of retail premises relative to the expenditure on offer.
Automotive property rents peaked later - in 2009 – and have proved more resilient to the downturn. Although they fell around 15% from 2009 to 2011 they have rebounded since.
Figure 2 shows the same indexed rents, but this time set against an index of new car registrations drawn from the SMMT. 2004 saw the end of four years of record-breaking sales of new cars in the UK and the number of registrations fell consistently until 2011 when it began to rise on the back of an improving economy and the necessary replacement cycle.
Although there is no clear correlation shown here between rents and new car registrations, common sense dictates that as sales rise, confidence increases along with ability to pay and expansionist corporate strategies begin to dictate demand.
2013 2014
2004
100
115
105
120
110
125
2005 2006 2007 2008 2009 2010 2011 2012
FIGURE 1: AUTOMOTIVE RENTS INDEXED AGAINST THE IPD QUARTERLY INDEX OF RETAIL AND RETAIL WAREHOUSE RENTS
Automotive Rents IPD Retail Warehouse IPD Retail Rental Value
Motor Retail Property Bulletin – Summer 2014
2013 2014
2004
70
100
80
110
90
120
130
2005 2006 2007 2008 2009 2010 2011 2012
FIGURE 2: AUTOMOTIVE RENTS INDEXED AGAINST AN INDEX OF NEW CAR REGISTRATIONS
Automotive Rents New Car Registrations
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SPECIAL FOCUS Property
particularly where dealer groups are strongly supported by manufacturers. As a consequence of this, we also foresee an increase in dealership stock coming to the market.
“Ultimately new requirements are location-led and where compromised facilities are located in, or around, major towns and cities, in our experience dealers will look to invest and relocate. This is clearly demonstrated by new facilities being built or under construction in Oxford, Milton Keynes, Colchester, Exeter, Newcastle upon Tyne and a number of locations across London where values have reached £2m per acre for development sites,” he said.
Consolidation continuesConsolidation has been taking place in the motor retail sector for the past few decades and continues today. The property specialists we spoke to say that more is on the cards. One such is Keohane of Colliers.
“Given the demand of the manufacturers and the increased occupational costs, we are of the view that we will see further consolidation with owner drivers continuing to exit the industry.
“This inevitably will lead to the larger groups growing size and also stronger regional groups. Examples of this include Vertu, Marshalls and Cambria, all extending the networks with different manufacturers added to their stables.”
Taylor at GVA also picks up on the increased activity and points out that a lot of the property transactions are for premium brands.
“It is these that continue to attract the most interest, and seemingly generous multiples have been paid recently, in particular for Land Rover businesses.
“There is another influence, of course, and that is the requirement of the manufacturers for enhanced corporate identity criteria, including, in many cases, larger showrooms. The need for potentially significant capital expenditure naturally creates a headache for smaller groups or owner drivers,
0870 777 6292www.rapleys.co.uk
For over 30 years Rapleys has been synonymous with the automotive, roadside, fuel and forecourt convenience property markets, providing our clients with an unrivalled continuity of service and level of experience.
and pragmatic advice on properties across the UK, whether this is to enhance asset value or mitigate liability.
We advise a diverse client base encompassing both large and small sized motor retailers, vehicle manufacturers, national
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NEW BUILD Vertu Motors is investing £500,000 into a new Infiniti Centre in Newcastle which is due to open in September. Pictured are Jarvis Simpson, Infiniti franchise manager, Norma Redfearn, mayor of North Tyneside, and Robert Forrester CEO of Vertu
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particularly if multiple sites are affected. “The ability to achieve an exit in a prosperous
market, thereby avoiding the need to relocate, redevelop, extend or refurbish property, is one that will understandably appeal to some and we anticipate this process to continue as the larger retailers extend their influence and representation,” he said.
Poynton at Knight Frank said: “Whilst I am an advocate of the old fashioned owner driver model, where the personal touch is key, in the modern era it may well be the big businesses that are best placed to serve the market.
“The Plcs and other major groups are so polished in these areas, having invested heavily, and are now well placed to grow further,” he said.
Property demandWith a rising economy the UK is also seeing growing demand for dealership property from outside. Those in the right locations are being targeted by retail discount chains like Lidl and fast food outlets like McDonald’s.
“The convenience store and discount retail sector is, as widely publicised, experiencing significant growth and we have seen a number of opportunities whereby discount group retailers have taken vehicle dealership facilities as the size and location generally tends to meet their property demands. Examples of
this include the former Volkswagen dealership in Cirencester,” said Keohane at Colliers.
Paul Taylor at GVA also sees interest from outside the sector. “There has been considerable activity from roadside occupiers. Coffee retailers now compete for sites with, or sit alongside, fast food operators. And the rise of the C-store shows little sign of abating with significant demand from the household-name retailers.
“Larger requirements exist too, as evidenced by Sainsbury’s acquisition of Colliers Motor Group’s multi-franchised site in Sutton Coldfield, with the three franchises in the process of being relocated to
purpose-built premises in Birmingham. The likes of Aldi and Lidl are particularly active. Demand is not constrained to retail, however. The residential market is returning, care home operators are acquisitive, as are developers of student housing,” he said.
Overall, it looks as if property rentals will continue to rise in 2014 with increased activity in an already buoyant motor retail sector. Consolidation will also continue apace as small owner driver businesses, achieving bigger profits, look to realise a good price as they exit the trade.
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NEW IN NEWBURY: City Motor Holdings, the Basingstoke-based group, has acquired a Peugeot dealership in Newbury from Marshall Roebuck. The outlet will trade as City Peugeot