Foreign investors continue to eye up dealer groups in the UK with their property value a magnet for potential takeovers.
That’s a key finding of the Automotive Annual Market Commentary from property expert Savills, which charted investments made by foreign investors in the past two years.
Acquisitions included US dealer Group 1 paying £346m for Inchcape’s UK dealer business and Alpha Auto paying £465m for Lookers.
Other acquisitions to have taken place include Brayleys of West Way (Nissan), Lithia of Jardine & Pendragon, Hedin of Stephen James BMW, Allen Group of Delgarth Motors, Van Mossel of Jacksons and Marubeni Auto of HPL Motors.
Overall, Savills said that automotive property trading rose 10% last year amid a general improvement in car dealership investment prime property pricing. It said this is expected to continue in 2025.
“As the UK automotive sector resiliently navigated the challenges faced in recent years, there has been a clear doff of the cap and a backing from global investors.
“There has been notable Middle Eastern and Asian investment, but more prominent activity has come from North America in large-scale acquisitions of businesses with vast property holdings,” said the report.
The UK stands out from mainland Europe because much of the property is freehold, and increasing in value, making for a good investment.
“The UK market is particularly attractive to overseas investors due to the number of freehold property assets held within the dealer group businesses.
“This is comparably much higher than the likes of the European market, where the number of freehold assets held by dealer groups is saturated by higher rates of sale and leaseback activity.”
Market Dynamics: Savills Analysis
- The Car Manufacturer – Car Dealer attitude shift following on from the dampening down of the Covid inspired online consumer rush encouraging car manufacturers to return enhanced respect to dealers as they need them, and their properties, to sell the vehicles.
- Market consolidation is changing the shape and size of established dealer “territories,” often now extending to 45 minute drive time catchments, impacting on site selection and retention.
- To control escalating post Covid construction costs dealers are prioritising existing properties over new developments.
- The increasing pace of consolidation amongst dealers is engendering rationalisation of their property portfolios, leading to the introduction of more multi franchise sites and repurposing of properties.
- New entrants are slipping into surplus space vacated by legacy brands and driving demand; evidenced by BYD (Build Your Dreams) rapidly expanding their footprint alongside Omoda and Jaecoo, creating a new sense of opportunity for dealers, property investors and asset managers.
- There has been notable Middle Eastern and Asian investment in the UK, but the most prominent activity has come from North America leading to large-scale business acquisitions of dealer groups with vast property holdings. The value of the underlying property assets is a particular distinction of the UK market and is very attractive to overseas investors.