Automotive Real Estate Ignites as the Economy Accelerates in Texas

Back in May, the headline at dfw.cbslocal.com read, “Texas Car Dealers Increasing Prices As Scarcity Spikes Amid Global Shortage Of Computer Chips.” And as recently as June 26^th, Forbes.com reported, “New-Car Shortage Pinches June Auto Sales, Drives Prices Higher, Forecasters Say.”All indications are that the global shortage of computer chips required to run the complicated electronics in today’s vehicles will not abate until next year. This shortage forced auto manufacturers to slow production, which in turn shrank dealer inventories. So what are consumers doing? Paying more to get what they want… if they can find it. For new and used car dealers, it’s a seller’s market in auto retail.
But it’s not only the cars that are hot. Automotive real estate is also a hot commodity, especially in Texas where the economy is making a speedy recovery from the turndown of the pandemic. We spoke with automotive real estate specialist, broker and former new car dealer Bill Bledsoe, Senior Vice President in the Land and Investments Division of Henry S. Miller Brokerage, to get his take on automotive real estate and buying a car in today’s market.

What should a car dealer look for in automotive real estate?

Depending on the scale of their operation and budget, medium to larger size dealers should consider warehouses at this time. There are consistently fewer small warehouses available. Therefore, prices for these older, smaller warehouses will remain firm and even appreciate because of such low inventory and the lack of smaller square footage (under 40,000 square feet) buildings under construction. Warehouses offer a variety of uses including new car storage, used car online sales, make-ready, service, parts, body shop and more. Every aspect of a new or used car dealer’s business can operate out of a warehouse. In addition, it keeps the inventory secure, clean and protected, which is particularly important during a hailstorm. Insurance rates may be lower, too. Finally, warehouses are easy to air condition, making them more appealing to consumers than a car lot on a hot summer day in Texas.

What kind of real estate do automotive dealers need now in order to better serve customers?

Many larger dealers are looking for off-site service and body shop facilities that are centrally located to the growing DFW population. They are considering large warehouses or former big box buildings, but in the current market these are almost impossible to find. Dealers prefer existing buildings, because the acquisition cost is typically less, and the time required to get it operational is shorter. Plus, newer construction tends to be much larger with very high clear heights, which most dealers do not require for vehicle inventory, a service operation, or an online, retail warehouse/showroom.

Where are dealers looking for automotive properties?

New car dealers are always looking for land to expand in the growing outlying markets, such as Melissa, Anna and Sachse. However, they also like in-fill locations because of the population density and proximity to city centers. An automotive real estate specialist brings added value to clients by knowing where there are off-market automotive properties for sale, including available warehouses, second-generation dealerships, and other “off radar” sites that would make for good automotive real estate.

What are dealers doing for customers in the current seller’s market?

Believe it or not, local new and used car dealers are consumers’ friends. They will move heaven and earth to find and sell a vehicle. In times like these, Texas car dealers know that if they go the extra mile, then they can create a customer for life.

In auto dealer lingo, conquest means taking a customer from another brand or dealer. There are many industry studies showing just how much revenue one new customer conquest is worth—sales, service, body repair and referrals to family, friends, neighbors and co-workers all add up quickly. Gaining a consumer’s long-term business is much more valuable than a short-term profit. In fact, some dealers are willing to lower the price of a car, even in this market, in order to grow their customer base for when this supply chain/inventory shortage blimp is behind us.

How are dealers helping consumers shop for cars?

Anyone can easily shop thousands of vehicles online. Search used cars and new cars with just the click of a mouse. Of course, some car shoppers prefer to kick the tires in a showroom, whether in their neighborhood, along car row or inside a local air-conditioned, used car warehouse operation of an Internet auto retailer. No matter the venue, car dealers are always excited to welcome customers and genuinely want to help them get the car they want at a fair and reasonable price. After all, that’s the only way they can stay in business!

The information contained in this article is general in nature and should not be construed as financial, tax or legal advice.  As with any financial or legal matter, consult your tax advisor and legal counsel.