The automotive property sector is seeing strong levels of occupier interest coupled with buoyant investment activity, according to research conducted by Knight Frank.
The research reveals that there has been an unprecedented level of occupier activity in the fuel and service area sub-sectors during 2015, along with the largest ever volume of investment in the sector as a whole.
Investors are increasingly attracted to automotive property by the prospect of strong covenants, secure long term income and high returns. Capital values in the sector have increased by 50 per cent in the past five years, comfortably exceeding the 40 per cent rise in All Property values over the same period.
Another factor in the appeal of automotive property is the long leases in the sector – frequently 25 year plus. In contrast, average lease lengths in the core commercial sectors stood at just 6.8 years last year.
Car dealerships account for 50 per cent of investment in the automotive sector and with good reason it appears. Knight Frank forecasts that dealerships let to major retailing groups will see capital growth against 2010 of 90 per cent during 2016.
Premium brand dealerships are the best performing assets, as corporate identity standards ensure regular and substantial tenant investment in the premises which serves to maximise reversionary value.
Overall investment in the automotive sector is expected to hit £650 million by the end of the year, with yields continuing to offer good value compared with other commercial property sectors.
“Investors are now fully aware of the strong credentials of automotive property and this is leading to record transaction volumes,” Knight Frank says.
Looking ahead, the report concludes that further records look set to be broken in the sector during 2016 on the back of the anticipated strong performance of the automotive market.
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