Dealership Deals

Smart ForTwo

James R. MacCrate, MAI, CRE, ASA argues on his blog, Appraisal and Valuation Issues, that automobile dealerships, often considered to be special

use properties, may no longer be considered as such due to the expected glut of vacant dealerships as Chrysler and General Motors reorganize.

While automobile dealerships are usually special purpose properties, they also have many attributes that make them attractive for alternative uses, but the market value as an alternative use is substantially different and probably results in a lower estimate of value.  Location has always been a primary concern for determining the success of an automobile dealership, as it is with most commercial real estate uses.  Many are located in desirable locations with good visibility.  The typical dealership has the following features:

Excellent access to the site.
Large, level, rectangular sites with good road frontage that can support alternative uses.
Brightly lit showroom for display.
Separate parts department area.
Large service area facility.
Above average security, fencing and exterior lighting.
Adequate on-site employee and customer parking areas.
Automobile reconditioning center.

It is now clear that there are too many dealerships and one must be concerned with the highest and best use of the property and consider alternative uses for the property.  Many of the expensive improvements that have been made may no longer contribute to the overall value of the property even though lenders may have made a loan based on the value-in-use, versus the value in exchange or market value based on alternative uses.  As automobile sales have plunged following the typical cyclical pattern, so too will the dealership properties fall in value unless an alternative use can be found that can utilize the existing improvements.

The key to determining alternate uses for the dealership properties is to look back to the fate of older and obsolete dealership properties and more recent re-uses of dealerships no longer needed. Capital Region re-uses which come to mind include a centralized laundry facility, motorcycle dealership, RV dealerships, a supermarket, a church, and at least one flex building with the showroom converted to office area and the service garage converted to equipment and product storage. Value and prices will of course change as well.

Click here to read the entire post.

Creative Commons License photo credit: drewgstephens

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