Investors revved up for car dealership investments

While overall car dealership investment property transaction volumes were down year on year by 58%, this was primarily due to a lack of stock on the market rather than the lack of appetite and was down only 33% on the 5 year average. Purchasers of car dealership investments over the course of 2023 were led by private buyers accounting for 50% of all acquisitions. Car dealers were the second largest purchaser accounting for 42% which is up from 25% in 2022. Funds buyers were lagging behind with 8% of bought investments, but taking advantage of the enthusiasm from cash buyers, and dealers supported by ready finance from their manufacturer partners, accounted for 92% of all sales within the market.

Car dealerships pricing movement trends can regularly be comparable to the strong performing industrial and retail warehousing sectors, possessing similar property characteristics to both asset classes. Prime yields increased to 6.25% from 5.75% in December 2022, in line with the medium and long term average for all car dealership investments, suggesting market correction has overshot.

Bill Bexson, head of the Savills Automotive team, says: “Car dealerships are increasingly under the spotlight with investors who are attracted by the strong investment credentials and a resilient revenue profile. As a result, nearly all of the stock that was brought to the market in 2023 has been sold or is under offer and this is drawing more stock into the market at pricing well outside the medium and long term sector averages. This presents savvy investors with good opportunities to capitalise on the robust fundamentals of the car dealership market as it transitions through the evolving changes in the provision of mobility services, such as EV’s, and enhanced vehicle and customer connectivity.”

The full commentary can be found here.