Why Automotive Needs Its Own Niche

BUENA PARK, CA—GlobeSt.com has learned exclusively that Avison Young's principal and automotive properties group practice leader Jodi Meade has completed her second Southern California dealership lease with Tesla Motors Inc., this time a seven-year lease for a 23,000-square-foot space at 6692 Auto Center Dr. in the Buena Park Auto Center here. Tesla immediately took possession of the site and will be making significant improvements to the space; the new-dealership opening is anticipated for this summer.

According to Meade, who represented building owner RST Associates LLC in the lease transaction and assisted Tesla in finalizing the lease negotiations, “This is the second full-service dealership location I have worked on in Southern California with Tesla. The company is a rapidly expanding automaker with its line of high-end electric vehicles, and this site will be transformed from a traditional dealership format to a very exciting new showroom concept and service center, designed to meet the needs of this new and innovative automotive technology.”

Meade previously handled the leasing of 6692 Auto Center Dr. on behalf of her clients Premier Chevrolet and General Motors as a temporary location while their 5-acre dealership was being developed within the Buena Park Auto Center. Premier Chevrolet relocated to the new store in October 2014, and RST Associates enlisted Avison Young's APG group to market the 6692 Auto Center Dr. space for lease. Shortly after being placed on the market, APG identified Tesla Motors, a manufacturer/dealer with which Meade had worked in 2014, as the ideal candidate for the property.

Meade notes that there are no other brokerage firms that offer an automotive-specialty group that caters specifically to the needs of automotive dealers, manufacturers and owners of automotive-specific properties. “The automotive industry is very unique when it comes to space needs and the rapidly evolving products and technologies, as evidenced by Tesla. Because of this specialized nature, industry players understand the value in working with real estate advisors who understand the nuances of their industry.”

Meade tells GlobeSt.com that she had launched an automotive group for CBRE in 2004 and has focused on this niche for the last 11 years. After joining Avison Young last year, she brought this practice to the brokerage. “There wasn't any other commercial real estate company that really focused on automotive. It's very unique and a very specialized portion of our retail environment. When dealerships became vacant during the downturn, there was not a lot of secondary life to that particular configuration. If it didn't remain automotive, it would be scraped and turned into some other core product. It begs to have someone, such as our APG, really focus on that and provide clients with a specialized niche.”

In addition, Meade tells GlobeSt.com, there are more than 20,000 dealerships nationally, so there's a tremendous amount of product and opportunity in this niche, and certainly with that, challenges during downturns. “But the automotive market has rebounded nicely over the last three or four years, and there continue to be new products and dealerships that find their way into markets where those brands aren't represented. There's great growth potential within the core dealership market, but we also focus on ancillary automotive retail users, lube-and-tune shops, service centers and other users—we go very deep, but we go broader as well.”

As GlobeSt.com reported recently, auto-parts stores are the most sought-after among 1031 buyers, in part because of tenants' commitment to the location, Hanley Investment Group's SVP Jeremy McChesney told GlobeSt.com exclusively. McChesney said single-tenant, net-leased auto-parts stores are a viable alternative retail investment to fast-food and bank single-tenant net-leased investments and are becoming a hot new sub-category in this arena.