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Globally, there are signs that the traditional new car dealership model is undergoing change. Total Property editor Jody Robb talks to some of the big players in New Zealand’s car retail industry about their commercial property requirements in a changing market.

CHARGED SHOWROOMS TURBO New vehicle sales showrooms are evolving in some of the world’s big cities in response to pressures on commercial land, and in line with the changing buying expectations of customers.In cities where land is in short supply, hugely expensive, and where its value can be optimised by a change in commercial

or residential use, bricks and mortar dealerships with forecourts lined with cars are likely to be replaced with digitised flagship stores.

These premises may rub shoulders physically with luxury retail stores like Gucci, Prada and Louis Vuitton and will be located in high footfall areas.

In London, near Piccadilly Circus, Audi has a new urban digital car showroom format that uses state-of-the-art technology to make clever use of precious city space.

After walking in straight off the retail street, technology puts the customer in the driving seat. Touch screen tables

enable them to configure their own Audi in realistic 1:1 scale, and to see every combination available. There is only one actual car on display at any one time.

Downstairs, private consultation suites – where equipment options, paint and fabric swatches can be examined – flank a lounge area, where customers can indulge in complimentary barista-made coffee whilst relaxing and watching Audi movies.

The off-site service centre is three kilometres away.

Audi’s new London retail environment is designed to reach more urban customers in areas where few rivals have a presence.

Global research and consulting company Frost & Sullivan, says a new generation of buyers will look to shop for vehicles in the same way they purchase music, clothing and the latest technological gadgets.

By 2025, the research company says globally, one in every five new car purchases will be made online. It says

digital showrooms and online retailing is “a big shift that is coming fast” with manufacturers increasingly looking to control direct, online sales.

The Australian Automobile Dealer Association (AADA) commissioned research recently among its industry stakeholders. It revealed that 84 percent of respondents identified a need for new or upgraded facilities by 2020, with 52 percent believing that investment was needed in virtual or digital showrooms.

Industry personnel spoken to by Total Property in New Zealand unanimously said that they do not expect the digitalised showroom concept to take over physical showrooms in this country any time soon, but they are watching international trends with interest.

In New Zealand, the big players are getting bigger, multiple brands are being consolidated under one roof, and commercial space is being reassessed and reconconfigured.

Artist’s impression of the new Giltrap building at 119 Great North Road in Grey Lynn, Auckland

HIGH FLYERSArguably the highest profile vehicle retailer in Auckland, Giltrap – where founder Sir Colin Giltrap’s sons Michael and Richard are now at the helm – flies the flag at 14 retail dealerships across 13 brands.

Starting out in the 1960s in the Waikato, and now entirely Auckland-based, Giltrap’s dealerships have a dominant presence along Great North Road in Grey Lynn, in Great South Road Newmarket, and on the North Shore.

Giltrap Group Holdings’ property manager Luke Senior says the group owns the bulk of its dealership sites and although this is their preferred option, they do lease ‘a handful’ of properties in locations where traditionally, land does not often come to the open market.

“We lease three sites in Great South Road where, if the opportunity to own the properties presented itself, we would probably put our hand up,” says Senior.

“The whole property side of the motor vehicle dealership equation is a complex one and, as group property manager, I’m always looking for efficiencies and ways to streamline our sites in order to maximise our client relationships and to enable the business to prosper.”

Senior says that in line with changing consumer expectations and manufacturers’ brand standards, Giltrap is refurbishing a number of its existing dealerships across the group. At 100 Great North Road, the large site occupied by Giltrap Prestige is still being maximised with an internal upgrade underway. At the former Archibald and Shorter site in Great South Road, Giltrap’s Volvo dealership is getting a facelift and 780m2 of upper level space is up for lease.

“We’re moving away from full occupation of some of our sites,” explains Senior.

“It’s good for the business to develop mixed-use properties. Given that we invest heavily in our buildings and can deliver a great product, we expect high-end tenants – who can align themselves with the aspirational nature of the business we are in – to want to be in the same building as us.”

The best example of Giltrap’s mixed-use property philosophy is its new high-profile development which is coming out of the ground at 119 Great North Road.

The property at ‘119’ is a nine-level Warren and Mahoney architects-designed building. It will house dealerships for luxury brands Lamborghini, Aston Martin and Bentley, separate dedicated workshop and technician facilities, two levels of carparking, and corporate office

space. Some of this office space is to be released to the rental market.

Senior says this property is a standalone mixed-use addition to the Giltrap portfolio and, given the location, the site warrants a high-end development.

“We are building to the maximum allowable parameters under council planning guidelines – boundary to boundary and to the highest height allowable,” he says.

“We have determined that the best and highest use for this particular site is retail/office – rather than residential apartments.

“Long-term thinking has been engaged with regards its design so that if – further down the line – we decided to take the dealerships out of there, we would still have a viable, desirable retail proposition to offer the market.”

As a market-leading owner/occupier, Giltrap requires – and will occupy – significant space themselves. Senior says the balance of the upper levels will be offered to the market for lease.

“We anticipate strong demand for such well-located and well-spec’d space,” he says.

“The floor plates are large and can be split if required and there’s ample parking ring-fenced within the building for office tenants.

“This is a future-proofed building that will not be defined by its initial use as a vehicle dealership.”

STRONG HOLDWith 16 authorised franchise brands under its banner – including Alfa Romeo, Jaguar, Jeep, Land Rover, Mercedes Benz and Porsche – Armstrong Motor Group is one of the largest independent automotive groups in the country.

Armstrongs’ principal and managing director, Rick Armstrong says the group was founded in Christchurch in 1993, has since consolidated a strong presence in the Wellington region and has headed north to where the real action is.

“We debuted in the Auckland market last year and that’s a core focus for us now,” says Armstrong, who has moved to Auckland to take up the reins of the business there.

“Strategically, we’re looking to increase our presence there and also in Christchurch. We have opted out of Palmerston North in order to hone in on the major centres, as the regions are probably best-served by local owner/operators who live and breathe the community.

“Given that Auckland has the bulk of the country’s population base, and as a company we want to be a national player, we needed to be in Auckland – and in a big way.”

market has been “quite static” there for the last few years. The company is not interested in taking too much more space in that region.

“To be fair, we have seen some glimmers of light in Wellington over the last six months, but we’re comfortable with the stable of brands we have there – and in Dunedin for that matter – so our eyes are now turned to Auckland and Christchurch.”

With higher volumes of sales, and upwards pressure on land values, the challenge is to make the best use of dealership sites using the space efficiently, effectively and – intimately.

“Dealerships – particularly those at the luxury or aspirational end of the market – are places where business relationships are fostered and nurtured,” says Armstrong.

“Our clients become friends of the business and they don’t just visit the dealership to buy a new car. They might drop in for a coffee, call in to have their car cleaned or get some work done on their laptop while their vehicle’s being serviced.

“That requires new thinking around the way the dealerships are presented and designed.”

Armstrong spoke to Total Property from Monaco where his son Marcus was competing in the world karting championships, and says the quality of dealerships in Europe is nowhere near as high as those in New Zealand.

“We might be on the other side of the world, but we’re right up there in terms of business smarts – and in the face that we present to clients,” says Armstrong.

“And while people will increasingly use the internet to research vehicles and even make enquiries, I don’t see New Zealanders buying cars via virtual computer-based portals anytime soon.

“Kiwis want to touch and feel the car they’re buying, and see the person they’re spending their money with.”

NEW YORK LOFT-STYLE DEALERSHIPEbbett Group, which has had its roots in the Waikato from 1928, is making bold moves away from traditional car sales environments to an urban high street retail experience.

With retail dealerships in Pukekohe, Hamilton, Taupo, Tauranga, Porirua and Wellington CBD, Ebbetts is set to move to new premises on the corner of Clyde and Grey Streets in Hamilton East where its flagship Volkswagen and Audi showrooms – separated by a plaza area with café – will front the street like other retail offerings.

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I’m always looking for efficiencies and ways to streamline our sites in order to maximise our client relationships and to enable the business to prosper.Giltrap Group Holdings’ property manager Luke Senior

Last year, Armstrong Motor Group acquired two high profile Toyota dealerships from the Giltrap Group – one in Grey Lynn, the other in Mt Wellington. Earlier this month, Armstrongs took over the high-profile former Continental Car Services site in Great South Road, Greenlane and launched its third Auckland Toyota dealership.

“Greenlane is the country’s premier automotive retail strip – it’s motoring mile,” says Armstrong.

“When the Greenlane opportunity presented itself, it was too good to be true so we grabbed it. Toyota were happy to come onboard with us as they had been trying to get back into Greenlane for some time.

“We have big plans for that site and ultimately, it will become something very special.”

Armstrong says the group owns a lot of its dealership sites around New Zealand, and appreciates that they can better control their own destiny without being beholden to a landlord in those instances.

“However, where land is not available for sale in prime locations, we like to work with proactive property owners and developers – such as Ngai Tahu in Christchurch, with our Armstrong Prestige dealership in Addington.

“That relationship allows us to prosper under landlord-tenant commercial terms. We’re pretty relaxed about whether we own property or lease it – and let’s face it, in the Auckland market, where property cards are played close to the chest, we‘re happy to be tenants.”

Botany in South East Auckland has been identified by Armstrong as an area that will ‘self-feed’ on the back of strong residential growth and newly-emerging neighbourhoods, so the company is looking to gain a presence there.

“It’s becoming increasingly difficult to get sites anywhere near to the central city so these satellite suburbs will come in to their own.”

Armstrong says while the company owns most of the property it operates from in the Wellington region, the vehicle sales

Given that Auckland has the bulk of the country’s population base, we needed to be in Auckland – and in a big way.Armstrong Motor Group principal and managing director, Rick Armstrong

Dealerships – particularly those at the luxury or aspirational end of the market – are places where business relationships are fostered and nurturedArmstrong Motor Group principal and managing director, Rick Armstrong

Audis will be parked inside in a starting grid formation with a nod to the racetrack. Reflective of its niche in the market, the Audi dealership will present a bespoke, hi-tech face to the public with a slick, sharp monochrome palette.

The Volkswagen side of the property will be more informal, relaxed, and feature light natural timbers and lots of white accents.

Meanwhile in the Wellington CBD, Ebbetts have created a boutique Holden dealership in a 2,000m2 two-level 1980s’ panel beaters workshop on Taranaki Street that now has all the hallmarks of a New York loft apartment.

Ebbett Group managing director, Ben van den Engel, says the company has been creative with its approach to the properties in Hamilton East and Wellington CBD and has not been afraid to push boundaries.

“In Hamilton, the temptation was to shift out to Te Rapa where bulk retail has consolidated, and where a lot of vehicle dealers have headed,” says van den Engel.

“However, I believe people are drawn to the city centre, hence our $10 million investment in the Audi/Volkswagen initiative.

“Likewise, with suitable property being so difficult to get in the middle of Wellington, we opted for a savvy approach and transformed a fairly dreary old building into something quite exciting.

“It has exposed brickwork, interesting fittings, cars on display over two levels, and a showroom opening straight off the footpath. There’s a café space so clients

can come and have a coffee or a drink after work.”

He says they are trying to create a complete experience for their clients who are becoming more and more educated about cars, and are looking for dealerships to add real transactional value.

“In the olden days, dealers had all the knowledge,” van den Engel says.

“Today, with the rise of the internet, people look online to investigate different brands and they are incredibly well-informed. They generally know what they want in a car.

“But I do think in the computer age, people still like personal contact and face-to-face dealings.

“Vehicle salespeople are no longer persuaders – they are facilitators. It is far more of a soft sell these days, but we still need great commercial premises.”

Ebbett’s business model includes a mix of owned commercial property, joint venture arrangements, and some leased premises.

“We own our central Hamilton site in Anglesea Street, our new Nissan dealership is a joint venture, we own some property in Taupo and have a long-term lease on the Taranaki Street property in Wellington,” van den Engel says.

“We are car people not property people – and this is a very capital intensive business – so whatever it takes to consolidate a presence and make a profit will determine where we physically are.

“We will look at growth opportunities when they come along.”

CAPITAL FOCUSIn central Wellington, Kent and Cambridge Terraces are the car yard headquarters for the capital. For some vehicle sales groups, it would be unthinkable to not have a presence there.

Gazley Motor Group owns and occupies two highly-visible sites along what managing director Myles Gazley says is the golden mile of Wellington vehicle retail.

Unlike in parts of Auckland where some former car retailing property is undergoing redevelopment to mixed use, Gazley does not feel that the value of central Wellington land outweighs the value of having a retail face in this strip.

“We own more than 4,500m2 of property in Kent and Cambridge Terraces encompassing yard space, showrooms and workshop sites,” says Gazley.

“I don’t think the land is overvalued to the point where a car sales operation is not a viable activity for the land.

“With central Wellington commercial land hovering around the $2,000/m2 – $3,500/m2 level, that’s still workable for sound, high-end vehicle retail businesses like ours.

“For the cheaper used-car yards, that value proposition may not work.”

Gazley Motor Group operates multi-franchise sites and has consolidated brands

in recent years to make the best use of the high-profile sites the company has.

It also has a satellite retail site and service centre in Lower Hutt. Gazley says they hold excess stock in a 2,000m2 leased ‘waiting area’ away from the central city as the property fundamentals in the CBD don’t favour storage.

“We have invested heavily in our central city sites – reflective of the high quality brands we represent,” says Gazley.

“The best brands have a strong presence in the Kent and Cambridge strips and if you’re not there, you won’t get the business, basically.

“I don’t believe people would go to a suburban shopping centre to buy top end product.”

Gazley, (pictured, right) says 18 months ago he significantly upgraded the company’s Cambridge Terrace facility to create a new dealership to service Fiat Chrysler Automobiles – essentially future-

proofing the look and feel of the site for many years to come. Nearby, in Pirie Street, Gazley has another after-sales facilitywith the latest service and maintenance technology.

“We are constantly upgrading our property stock – in line with vehicle brand expectations and protocols,” says Gazley.

“Clients appreciate it and having nice surroundings elevates the whole car-buying experience.”

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Vehicle salespeople are no longer persuaders – they are facilitators. It is far more of a soft sell these days, but we still need great commercial premises.Ebbett Group managing director, Ben van den Engel

We have invested heavily in our central city sites – reflective of the high quality brands we represent.Gazley Motor Group managing director, Myles Gazley

The used car market looks set for a shake up with one of Japan’s biggest car dealers announcing its arrival in New Zealand by leasing most of a former furniture factory on the North Shore in a big deal negotiated by Bayleys.

In one of the largest industrial leasing transactions concluded north of the harbour bridge this year, giant Japanese car seller Gulliver International Co Ltd has leased close to 8,000m2 in the Wairau Valley.

The seven-year lease of the bulk of the former Morgan Furniture Lazy Boy manufacturing plant on more than one hectare of land in Archers Road encompasses 7,227m2 of ground floor warehouse space and 673m2 of upstairs offices (pictured right).

Along with a small showroom on Broadway in Newmarket, it is the publicly-listed Japanese company’s first foray into the New Zealand market.

Gulliver intends to import large volumes of high quality, low mileage second-hand Japanese cars into New Zealand at very competitive prices given their low cost business model.

Gulliver’s New Zealand operation will be selling both direct to the public and to used car dealers and will be transacting much of its business online with a New Zealand-wide delivery service planned.

The company will undertake substantial refurbishment of the Archers Road building, including a re-lacquering of the wooden-on-concrete ground floor. Part of the complex will be utilised for one-stop-shop vehicle servicing with the balance used as showroom space. Other features of the building are likely to include customer service facilities such as a café and possibly a children’s play area.

The Gulliver lease is part of a growing trend both globally and within New Zealand for high turnover car dealers – that do a lot of transacting online – to run their businesses indoors rather than through traditional open car yards.

This reduces the amount of car washing required and also means

potential purchasers can view vehicles in comfort, protected from fickle weather.

The undercover approach is also breathing new life into older, dated industrial buildings, previously used for manufacturing and which often having low studs and lots of columns which makes them generally unsuited to the requirements of modern warehousing businesses.

Another property in Portage Road, New Lynn where the owner was potentially looking to subdivide the older building into small industrial units, has also been leased to a car importer and wholesaler. The dealer’s business is currently spread across two smaller properties and will be consolidated under one roof in the 4,000m2 low stud space with a saw tooth roof which lets in lots of natural light.

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