[+] Developers Eye Car Yards as Sector Shifts Gear

It comes as no surprise that two-thirds of Australians are buying their cars online due to convenience, perceived price benefits and ease of purchase.

Which leaves the question: what is the future of car yard real estate?

Australia is littered with car yards throughout its fringe CBDs and into the suburbs with popular streets such as Parramatta Road in Sydney “over-exhausted” with dealerships taking up valuable commercial property that have been almost vacant with foot traffic due to ongoing lockdowns during the past 18 months.

In Victoria, the situation has been even worse prompting numerous “off-market” inquiries into car yard sales with expression of interest campaigns launching with regular frequency.

“In the next 10 years most of the car yards in metropolitan Sydney and Melbourne will be redeveloped for commercial and residential use,” Charter Keck Cramer chairman Scott Keck says.

“This will be more appropriate development in alignment with the growing population of the states. Councils will come under pressure to rezone the land. Some car yards will move out of the city and inner city suburbs into regional Australia, where there will be more space.

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“Car yards are quietly being displaced. I believe there are going to be more selling of vehicles through the internet, boutique presentation of vehicles such as shopping centres, as Tesla have done, and overall, I think there will be different marketing strategies to attract existing and new buyers of cars.”

New car sales slump

What is not aiding car yards is the drop in new car sales. There were 916,968 new vehicles sold in Australia 2020—a fall of nearly 14 per cent from 2019, making 2020 the softest year for new car sales since 2003.

Statistics from the Federal Chamber of Automotive Industries reveal that from 2017 new car sales in Australia have been declining. In April 2021, new car sales had plummeted 48.5 per cent year-on-year, the biggest decline in 30 years and the 25th consecutive month of plunging new car sales.

▲ New car sales have slumped on the back of pandemic lockdowns and as consumers explore new ways to buy a vehicle.

At the same time, used car sales rose significantly with record prices for second-hand cars. Consumers don’t feel the need to go to a car yard to buy a used car.

A poll conducted in unison by Bingle and Newspoll found that 64 per cent of Australians found buying a car online was a lot easier than dealing with a salesperson. Almost, 80 per cent of consumers believed they had saved money by purchasing online.

An outdated model

“The retailing of cars by traditional means of large showrooms and open air car yards is outdated, and on the verge of major disruption,” Savills CBD and metropolitan sales state director Clinton Baxter says.

“The notion of occupying a huge area of land in prime highway positions, millions of unused stock on site sitting for weeks or months in the elements, for just a few sales per week, is fast becoming an absurd business model.

“With pressure on land use in our major cities leading to rising land values, and hence rising occupancy costs such as land tax, car yard operators are now looking to other methods of selling cars and are vacating or selling sites and freeing them for redevelopment for alternate and better uses.”

New car companies such as Tesla have also taken a different approach to selling their vehicles, ignoring its competitors by not leasing or paying for vast sums of land but by marketing their vehicles cleverly online or in established areas of heavy foot traffic.

▲ The steady rise of Tesla in Australia has shown consumers are not wedded to buying new cars from a dealer.

“Telsa has demonstrated that it can sell thousands of cars in the Australian market without a single traditional dealership,” Baxter says.

“Tesla uses regular-sized shops in major suburban shopping centres to introduce its product to the market. The rest of the purchase is done 100 per cent online, with delivery and service in non-prime industrial locations—not main highways.

“Even Eagers Automotive set up Carzoos in Brisbane, which was a little village, where customers could return a car within seven days if they didn’t like it—no questions asked.”

All cars in the Carzoos village came with a discounted no-haggle price, a 175,000 km warranty and 12-months free comprehensive motor vehicle insurance.

However, Eagers Automotive has now abandoned that concept and replaced it with Easyauto123—aiming to have 11 used car outlets by the end of the year.

Most car yard owners don’t want to admit publicly that their business model is in trouble. Many are quietly working behind the scenes to foster deals to sell land and hold less stock. After all, if the pandemic has emphasised to the general public one simple fact, it is that almost anything can be bought online and either delivered to your door or picked up.

The days of open-air car yards along our main roads are fast-becoming a thing of the past.

▲ The days of the mega car yard seem numbered as consumers' habits change and the opportunity these prime sites present for redevelopment become too good to ignore.

“We are sticking true to our ‘hub and spoke’ dealership model, but that is not to say there is no change in the sector, with some manufacturers re-evaluating their distribution strategies,” Peter Warren Automotive Holdings chief executive Mark Weaver says.

“We firmly believe that this evolving strategy will rely on consumer experience centres, delivery centres and service hubs and hence lend themselves to multi-branded, highly cost effective locations such as our existing auto-mall concepts, which allow for the growth and contraction of individual brands from a single location or in close proximity.

“The pandemic has obviously touched every corner of the world and car manufacturing and supply chain distribution is certainly among them. This has driven some, in our opinion, fundamental changes to the way the automotive supply chain will manage inventory going forwards which will in turn lead to more customisation of cars.

“We’re in an online world now and consumers can customise their cars more than ever before.”

Not only that, but consumers can buy from wherever they want, changing the dynamic back in their favour.

Car yard sales in 2021:

Sunbury Ford

Address: 101-107 Horne Street, Sunbury
Land: 4700sq m
Lease: New 15-year lease at $500,000 per annum rental
Price: $9.6 million
Sale: Sold to Sydney-based investor

Former Honda showroom and car display yard

Address: 1022-1028 Burwood Highway, Ferntree Gully
Land: 3930sq m
Lease: Vacant
Price: $2.88 million ($734 per square metre)
Zoning: Commercial 2 zoning
Sale: Sold to a developer

Former Honda showroom

Address: 85 Maroondah Highway, Ringwood
Land: 2616sq m
Lease: Vacant
Zoning: Commercial 1 zone
Price: $6.6 million ($2500 per square metre)
Sale: Sold to a developer

Burwood Nissan

Address: 101 Burwood Highway, Burwood
Land: 3928sq m
Lease: Leased at $552,000 p.a. to Autopact Group on a 3-year lease
Zoning: Mixed-use
Price: $10.9 million
Sale: Bought by an investor

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