Year-Round Auto Show

Auto Parks Map Out the Future of Car Buying in America.

Car dealers may be the "old dogs" of retailing-slow to change and wondering why they should, especially if they are still making money. After all, people must come to them to buy cars and they don't do it every week-so why should they mind driving a little bit out of their way?

But even old dogs are perking up their ears at the sound of a new whistle. Slowly but surely, customer service is making inroads into the process of car buying. Car makers are pressuring dealers to "clean up their act," and, in response, dealers are attempting to define and improve consumer satisfaction.

Increased customer satisfaction includes a change in the car-shopping environment. In location, design, and amenities, the car dealer showroom is heading in a new direction. Master-planned automotive malls designed with the consumer in mind are becoming part of the suburban landscape, right out there next to big-box retailers and regional malls.

More than a decade ago, auto malls and auto parks began in California, and they are now spreading across the Southwest, as well as places like Pennsylvania, Illinois, Wisconsin, and Florida.

To a real estate professional, change can provide opportunity if it is carefully analyzed. Developers are learning that if an auto park is designed with the car buyer in mind, dealers will be motivated to purchase the land. However, the 38 manufacturers that market their vehicles in the United States must approve proposed dealership sites; thus, only 38 people really can buy land in an automotive park development-creating the opportunity of a high-risk/high-reward development in a specialty niche.

The key to success in this area is meticulous research of prospective auto park developments. Those who don't will receive the short end of the stick-not the best approach for luring the old dog off the front porch.

What Is an Auto Park?
Auto parks are master-planned developments that provide consumers with a pleasing array of freestanding dealership buildings arranged in immediate proximity to each other. They tend to be separate dealer/owners.

Auto malls are similar in concept but, like a shopping mall, each dealer is connected, creating a structure that is all under one roof. Typically they are smaller than parks and may only have one actual owner with several franchises.

Both auto malls and auto parks allow car buyers to visit each dealer facility and compare product, price, selection, financing options, and dealer approach, in the space of an afternoon-providing the consumer with the benefits of a "year-round auto show" and more.

The Future Location of Car Dealerships
Car makers and dealers are locating auto malls and parks near regional malls and power centers. "Project 2000," General Motors' conceptual plan, places dealerships near major retail developments, including category killers, big-box retailers, and regional malls. The theory is to put those cars right up under the noses of eventual car buyers on their weekly trips to the mall or the local Home Depot. When buyers do decide to buy, they'll know exactly what's available and where to find it.

It is a far cry from the auto rows or "automotive clusters" that line the main streets of some towns today. Often characterized by dated architecture, display lots that have been shortened due to road widening, hazardous ingress/egress, and confusing site layouts, these sites tend to be deceitfully expensive for the dealer. Various out-lots for additional storage, dings and scrapes from excessive moving of cars, and a dated environment dissuade buyers from entering, reducing potential profits and thus increasing costs.

What Drives Demand?
However, auto parks are not "build it and they will come" projects. In some parts of the country, the concept may not work; obviously a small trade area will not support a substantial representation of enough brands to make an auto park a going concern.

The key to developing a successful auto park is meaningful demand-based research. To negotiate effectively, developers need to determine the demand for each brand in the defined trade area-literally the number of Pontiacs that have been sold and will be sold-over the next several years.

R.L. Polk, a data sales firm based in Detroit, is one company that accumulates information for each vehicle sold in the United States. It can be instrumental in assessing the trade area, identifying a new trade area, and providing a historical background. Factories use similar data on software systems that track sales of their brands and competitors and define trade areas as a whole. They may, however, be defining their trade areas based on politics within the dealer franchisee/franchiser relationship, rather than geographical boundaries or the direction or amount of new growth.

Locating Tenants
If the data support the creation of an auto park or mall, tenants will come from two sources: relocating established dealers and creating new dealerships.

Relocating Dealers. Convincing dealers to relocate to a new development is a tricky situation. A move will most likely mean an increase in rent; dealers must be convinced that it will be offset by an increase in business at the new location. Also the question of what to do with the old site must be answered if the dealer owns that facility.

In addition, state statutes or franchise agreements may determine how close dealerships selling the same makes can be located to one another. Such agreements might prevent a dealer from relocating. Relocation-based developments are more likely to be found in slower growth areas; such developments require very careful analysis.

Establishing "New Points." Areas of dramatic growth may support several "new points"-new dealerships-to meet the demand created by the ever-increasing "roof top" population in the trade area. Such growth situations offer better opportunities than a project that relies on the relocation of dealers.

There are, however, areas of concern to address. First, factories must approve the location and specific site within the development. Developers may have to update factory representatives, because they sometimes have vast territories and rely on their dealer networks for initial information. Factory representatives can be persuaded with a presentation package that successfully wages the argument that a new point is justified by current and future demand for that brand and by demographic research.

Second, dealers are allowed to "protest" a new point within certain limitations. This is a form of due process so factories do not put a dealership on every corner, and likewise, so dealers do not claim trade areas so large that a car buyer has to travel for hours just to shop or be serviced. This can slow down or even stop a dealer from locating a new facility.

Third, municipalities can literally make or break proposed auto development, with regard to zoning. Each project will be different, but the developer needs to reassure the municipality that it will be competitively priced. In turn, the city needs to assure the auto park developer that zoning is not easily granted in the trade area. Many times a development agreement can tie these and other mutually beneficial goals together into a common successful plan.

Developers should point out that cities gain from the auto park development, too. Most cities will benefit by collecting sales tax revenue, decreasing traffic problems with controlled ingress/ egress, and trading a "visually challenged" auto row-that may not be in compliance due to "grandfathered" clauses-for a beautifully landscaped and well-planned development that may draw more consumers into the area for shopping and other activities.

While potentially bothersome, these controls on the establishment of new points are understandable. If two auto park developments go head to head with one another, everyone will fail. Developers will lose, because they will never absorb the entire development. Dealers will lose the synergistic quality that occurs from locating together. Finally, consumers lose, because the integrity of the "one-stop-shopping" concept is dead.

Gearing Up for a New Design
A successful auto park development is designed with the car buyer in mind. Although ideas and concepts are plentiful, building on the basics is usually the safest route to follow.

Development Size. Development size is a direct result of research. Defining the demand of new vehicles and knowing the rent-factor-per-car ratio will help target a size. The local economy influences size to some extent-a strong market leads dealers to buy more land and a weak market encourages them to buy smaller parcel purchases.

Lot Size. In the development itself, it is important to "value engineer" the lots for each buyer-foregoing the desire to sell the largest piece of land possible to each prospect. Dealerships that cannot support their rents ultimately close, working against future marketing efforts for other sites.

Not all buyers' needs are the same. For example, if each buyer goes through site analysis, dealer A might not need the 32-foot strip he initially thought he did, and dealer B might need just that, to accommodate an entire row of parking. Initially, the lots should be platted small, because it is easier to piece lots together than to negotiate portions of large lots.

Loop Road Philosophy. A carefully planned loop road can provide a pleasant driving experience for a car buyer's test drive in an unfamiliar vehicle. Additionally, it provides comparable frontage ratios, controls traffic and safe ingress/egress, and brings value to parts of the park that may be perceived as less valuable.

Frontage is very valuable to dealers, who will want to negotiate for as much frontage as possible; however, developers will figure the optimal frontage per acre. A big Ford sign tells all about the products available but the "front line" displays the used inventory. Six out of 10 buyers never purchase a new vehicle, so a successful used car department directly contributes to the dealer's profit. Factories generally pay less attention to accommodating used inventory, but they do recognize that the dealership must succeed on all fronts. An experienced design team can develop ratios of frontage-per-acre for each lot.

Controlling traffic is also an important function of a loop road. Ideally, the loop road will take a car buyer by each dealership without forcing directional decisions. This means reducing intersections and creating an auto park transportation system that makes it as easy as possible for the car buyer. Prospective dealers can aid in the selection of the best entrances for sales and service, while reducing the prospects of accidents.

Loop roads often are designed to direct traffic to what would have been the least-valuable portion of the development first, thereby increasing its value. Lower-value areas are now easily accessible and are not at "the end of the road." Cul-de-sacs, crisscross intersections, and circle roundabouts are not part of a successful automotive development, because they give car buyers too many options and do not promote controlled flow.

The Three Ss. Setback, sales, and signage are areas that need to be discussed with the municipality that has jurisdiction over them. In many parts of the country it is not uncommon for the city to require developers to provide for a generous setback off of the road for "parking." Plus, some cities require that the cars be screened due to their "unsightly nature." Obviously, car dealers want prospects to see the cars, so these variances need to be discussed and agreed upon before marketing the development.

Disney World Effect. The Walt Disney Company does a great job creating a sense of arrival and departure at its theme parks. An auto park should do the same on a smaller scale. This is achieved by using landscaping that provides for the visibility of the cars and gives a sense of security and newness and by making the loop road as easy as possible to traverse. Entrance monuments should coordinate with signage and even mailboxes. Marketing with a sense of fun-as in naming roads "Piston Parkway" or "Test Drive"-is an additional effort that highlights consumers' sense they are someplace new and friendly.

Many factors create a successful auto park development. Building to the "end user" is essential. With the continuing trends toward consumer convenience, the old dog dealers of yesteryear will either have to join the race or get off the road.

James M. Mullin and Arthur P. Mullin, CCIM

James M. Mullin and Arthur P. Mullin, CCIM, are partners of Mullin Partners Real Estate Corporation in Scottsdale, Arizona. You can reach them at (602) 443-9300. Say Good-bye to "Fast Eddie" Looking for a good deal on a used car? How about stopping by a place that offers almost 1,200 late-model used cars at one location? All vehicles carry fixed prices, based on local market values, and vehicle warranties are part of the price. And you can receive an appraisal for your existing car that is good for cash, whether you buy today or not. Is this a dream induced by watching too many late-night used-car commercials? Actually it\'s the latest trend in the automotive industry: mega-used car dealerships. Well-financed companies are taking this concept and turning it into reality. The most experienced is CarMax, which is wholly owned by Circuit City in Georgia. CarMax sold more than $304.5 million worth of used vehicles last year, gaining the respect and attention of the automotive industry. One of the stores even became a new car "franchisee" for Dodge. Nine other dealers across the country have banded together to create Drivers Mart, with plans to add more than 100 locations throughout the United States. Some Saturn dealers have the greatest ownership interest in Drivers Mart, bringing with them an already established aura of consumer satisfaction. Owners of these mega-lots are banking on the hope that this pleasant taste of respect will linger for a long time, eventually revolutionizing the car-buying experience. That\'s good news for land sales, because the land required for these sites is tremendous compared to a typical dealership today. Many need 20 to 35 acres at a time. Additionally, the franchisee/franchiser agreements that outline distances between same makes does not exist. This allows a mega-used car site to go where the thrust of the retail activity is instead of being steered by state statute or dealer agreement. For the real estate professional, the mega-used car concept is a new twist on the category-killer/big-box retail concept. The big difference is the product-instead of toilet paper or color televisions, these category killers have $8,000 to $30,000 cars on the shelf depreciating every day. Yet consumer word-of-mouth is certainly helping deplete that stock. Ninety-eight percent of CarMax buyers would recommend the mega-dealership to a friend because the consumer-friendly concept provides a good deal on a reliable car in a short period of time with no hassle. Look for more retailers to get in the trend along with other dealer groups. Sears and Walmart are watching Circuit City\'s profits closely.