Shortage of land puts brakes on car dealers

10:00 AM Wednesday April 15, 2015 Colin Taylor

Aerial view of 1.8 ha site at Fred Thomas Drive, Takapuna – identified by a yellow border – that has been purchased for a luxury European car dealership.

Sites for car yards are in demand across Auckland but dealers are driving up against the city’s chronic land shortage while demand for their vehicles continues to accelerate.

John Jefferson of real estate agency Savills says the car industry is streets ahead of traditional developers in buying land. “They don’t have to make their purchase stack up as a property deal – they buy the sites to expand their businesses.”

He says Savills is seeing it across the entire vehicle industry and especially in sought after areas are Otahuhu, Penrose, Onehunga and even further south. “We have seen a flood of car importers now selling cars from non-traditional vehicle dealership areas. Dealers with lesser quality cars are considering property in outlying areas where land is cheaper.”

Jefferson and Paddy Callesen, Savills joint managing director, have sold two greenfields North Shore sites for $21 million to luxury brand dealerships and they are receiving increasing inquiry from car dealers across Auckland wanting suitable sites to start-up or expand their business.

A one hectare site at Wairau Rd has been bought by Sime Darby Motors for $9 million to build a new BMW showroom and yard and a 1.8 ha former council site at Fred Thomas Drive, Takapuna has been purchased for $12 million by Gulf Enterprises for another luxury European car dealership.  

Sime Darby Motor Group (NZ) has earthworks resource consent and activity will begin work soon on the Wairau Rd site. The company is partof a Malaysian-based diversified multi-national and has an annual turnover of more than $550 million from 34 car yards throughout New Zealand.

Callesen says the properties were the last two big undeveloped, high profile sites in the North Shore’s business precincts. 

The Wairau Rd site, opposite Pak‘nSave, was originally bought from a private owner by the council under the Public Works Act for roading and the part not used was offered back to the original owner, who worked with a developer on options for the land.

When the Fred Thomas Drive site was being marketed there was so much interest from vehicle dealers wanting land, Savills agents began scouring the market for other high profile sites. “We asked the Wairau Rd property owner if he would consider purchase offers from car dealers as we had so much demand from them,” says Callesen.

“Marketing commercial properties often throws up a few surprises and in this case, the highest and best use for both sites was decided by the car industry, with two dealerships having the biggest brands topping the offers made..”

Callesen says the car industry is just catching-up on delayed development after years of inactivity during the global financial crisis. “During that time the sector also changed and many people are looking at vehicles online and then visiting a car yard to check them out before buying.”

He cites a McKinsey report on innovating automotive retail that says the good news for car dealerships is that customers still rely on them as they want to test-drive a vehicle before buying and vehicle servicing also is still an “off-line” necessity. “Vehicle yards and dealerships will remain a touch point in the buying decisions of customers despite the proliferation of online searching and social media.”

Savills says New Zealand’s luxury car sales are powering away. “Last year motorists with deep pockets drove more than 6000 new top-end cars away from dealerships while last month 346 Mercedes Benz cars, 342 BMWs and 298 Audis were purchased across the country.”

Jefferson says car sales have gathered pace since New Zealand came out of the global financial crisis in 2013 and some dealers say they are only limited by supply.

“New car sales are a sign the economy is strengthening. They are usually the first thing to go when people fear the economy is taking a dip,” Jefferson says.

He says more than 118,000 imported cars were off-loaded at Ports of Auckland’s wharves in the first half of this financial year, up from 100,000 during the same period last year. “Ports of Auckland says this aspect of its business is only going to grow as the population increases with most of the country’s used cars come through Auckland.”

Between June 2007 and June 2013 about 50 per cent of car sales were for medium sized vehicles, followed by small cars at just over 25 per cent and large cars at less than 25 per cent.

Paddy Callesen, Savills.jpg

Paddy Callesen, joint managing director of Savills.