By undertaking regular reviews of their infrastructure, motor retailers can often put a stop to rising costs or free up cash for investment elsewhere in their business, David Chittenden, director of Colliers CRE, told delegates at last month’s AM Financial Control in Motor Retail conference.
Chittenden cites a recent Royal Institute of Chartered Surveyors study about wastage, which highlights inefficient use of property, wasted space, non-appealed sites and the potential of sale and leaseback to reduce debt and release capital.
He suggests sale and leaseback as a great opportunity for dealers tied down by the high investment costs involved in modern showrooms. However, the drawbacks are a reduction in the flexibility of the property, and the possibility of rents going up. In addition, many smaller dealers regard the property as their nest egg for retirement.
“It’s difficult to encourage dealers to sell the family silver, but it is important to take advantage of what is now a very buoyant investment market in property,” says Chittenden.
He believes the best strategy for dealers is to have a mix of leasehold and freehold properties, as this can make it easier to sell the business at a later date. Groups which have a mixed portfolio include Pendragon, Sytner and Bristol Street Motors.
But it is essential with leasehold properties to include the right rent review clause, Chittenden adds. Some dealerships are paying almost double the £14 per square foot rent which he believes is fair for a showroom.
“Undertake a property audit and look at things such as restrictive covenants, rent reviews, rights of way and clawback provisions – all of which can affect your business,” says Chittenden. “Know your property. Be prepared for every eventuality. Be proactive, and know the legislation,” he adds.