The days of visiting a string of car yards on the same city street might be disappearing, but the search for cheaper land for new or relocating car yards is heating up.
Used car dealers can no longer afford to maintain yards in Auckland’s central suburbs. The cost of land outweighs the returns they get from their businesses and many are moving to outlying suburbs.
Change in the industry
In 50 years the Auckland industry has changed dramatically. Car yards were prominent on Queen St but it has changed to smaller showrooms and car storage warehouses in less expensive areas. The rise of online retailing has had a big effect on this trend.
Some dealers say only 10% of their business comes from people walking in off the street and the rest from online.
Car importers are pushing the move to cheaper areas as an ever increasing number of imported vehicles come across Ports of Auckland’s wharves.
In recent years...
In the first half of the financial year car imports were up 19%. More than 118,000 vehicles were unloaded at the wharves compared with nearly 100,000 for the same time last year. This number is expected to climb as the population increases through external and internal migration.
The number of vehicles households own increased 0.1% each year between 2006 and 2013 despite a sluggish economy and the global financial crisis. New Zealand now has more vehicles per household than almost every other country in the world and people spend $2 of every $100 in the Consumer Price Index basket on second-hand cars and $1 on new vehicles, according to Statistics New Zealand.
What does it all mean?
As the growth in car sales continues, real estate agents are scrambling to find enough land for the number of car dealers looking to establish new premises in cheaper areas. Particularly favoured are Penrose, Onehunga and areas further south as car importers with lesser quality vehicles sell from sites that would not have previously been considered.
Branded dealerships are the only vehicle sellers who can afford to stay on high-priced city land and many have upgraded their premises over the past few years, while others have bought new sites for development to push their brand and reputation.
The top 10 dealers can support staying in the city or suburbs close by but after that it becomes marginal. The big dealers help offset high rents or property ownership costs by offering other services, such as finance, parts and servicing.
Overseas multi-level showrooms are being built featuring café-bars and designer lounges to entice high-end buyers.
Even finding enough suitable greenfields land for Auckland’s big brand dealerships to establish new premises is proving a challenge for real estate agents. Price is not the barrier but the availability of land in a booming market that is short on housing sites everywhere is the challenge.
However, it is an area of the real estate industry where property fundamentals don’t have to stack up to make a deal. The land is bought to accelerate business.
A recent report by McKinsey says many of the luxury brands are starting to upgrade their retail premises by piloting new formats, such as online and boutique-style stores.
Despite the proliferation of online stores, the report says car buyers still rely on visiting car yards to test-drive a vehicle before buying and vehicle servicing is still an “off-line” necessity.