Investment in car dealership property surges in 2022

Investment in car dealership property reached one of its highest levels on record in 2022 at £371m, up 39% on 2021 and significantly above the ten year annual average of £258m, according to the latest Savills Motor Retail Market report.

Investment sales volumes were only higher in 2014. Following a strong start to the year prime yields at the end of 2022 were 5.75%.

Savills said the car dealership market is not being impacted by uncertainty as definitively as other sectors, as underlying occupational activity is resilient, with dealerships continuing to report strong returns and trading conditions, albeit profitability is being tempered by rising interest, energy cost and inflation.

A shift in buyer profile towards occupiers from pre-pandemic has also been reported, with the proportion of occupiers acquiring car dealerships rising significantly from 6% in 2018 to 25% in 2022.

Bill Bexson, head of Savills Automotive, says: “Car dealerships offer strong investment credentials amidst uncertainty which appeals to investors looking for a safe haven for their money in turbulent times.

“Its uncorrelated market performance and resilient revenue profile has led to 2022 being one of the best years on record for investment in car dealerships.”

“While volatility and downward pricing trajectory has driven some investors to dispose of car dealership assets to raise cash and liquidity, we have witnessed stronger demand from tenants buying assets they occupy, with other tenants buying assets they could either trade from or for income.

“Alternative users, such as self-storage and discount food retailers, have also been active, enjoying good returns with the anticipation of future redevelopment and occupation.”

“We expect 2023 to be just as active driven by the sector’s ability to combat inflation to sustain real value, and the appeal of both security of income and income growth potential.”