The implementation of market area policies and mass terminations by manufacturers are creating new challenges for dealers. Martin Vickerman, Reg Vardy plc group property development manager, believes there is an exciting future for motor retailing as long as groups manage their properties well.
''In a climate of uncertainty and rapid change, many traditional and accepted structures in the motor trade are under pressure and being questioned.
This is reflected in the property sector where there is a raft of issues from 'clicks and bricks' strategies and mass terminations. These are combined with changes in planning policy and the question of the value of premises where alternative use may be required.
The car showroom has a secure foreseeable future and plays a key role in any integrated internet strategy. While the total number of showrooms across the UK will continue to decrease, the quality of construction, presentation and location will substantially increase.
For example, we are constructing a new dealership in Kilmarnock to enhance our Vauxhall representation. However, in the future, the traditional multi-functional aspects of some dealerships including service and bodyshop facilities may be relocated to more cost efficient, but easily accessed sites.
They might be replaced with an enhanced and a more diverse customer experience in the showroom.
The potential for more unexpected terminations highlights the need for comprehensive property acquisition and disposal strategies, which take full account of planning policies, alternative use values and tenure structures. Being terminated four years into a 20-year lease with a restrictive user clause and five-yearly upward-only rent reviews can create a lot more than a headache for dealers.
It raises the question of why dealers, in a market with such a high level of manufacturer control, entered into such arrangements in the first place. And if the terms of these leases, specifically the rent, truly reflect the motor retail market.
Most retail park occupiers would not enter into leases on the terms that motor traders do if they had the constraints and uncertainty of the retail motor trade. These arguments must be used not only in acquisition negotiation but also in rating and planning appeals.
A proactive approach is required to developing portfolios, which accommodate predictable future changes and allow flexibility in rapidly changing markets.
The subsequent management requires the professional assessment of exit strategies and a controlled expansion programme, which looks to a future beyond the opening day of a new dealership.
The motor retail business does not, however, work in a vacuum and the continuing quest for better sites brings competition from a flourishing roadside property market. This ranges from the well-known fast food operators paying £1m per acre to relatively new and aggressive companies, building health and fitness clubs and medical centres.
These businesses can compete on price and may be perceived to have more desirable planning uses. However, at Reg Vardy, we believe a well-researched approach is helping to channel this wide range of well-funded potential occupiers into surplus facilities.
The message may not be simple but it is clear that there is an exciting and challenging future for the motor retail property market. With planning and knowledge, it can be managed to a better and more profitable future.''