Digital Dealer - July 2018 - 18

D E A L E R OP S & M ANAGEM ENT: Own e r shi p

By ERIN KERRIGAN
Founder and Managing
Director, Kerrigan Advisors

Dealership
Real Estate -
to Invest or Not?
In the first quarter of
2018, dealership rents
rose considerably on a
quarter-over-quarter basis
(see Chart 1). This increase
is both a blessing and a
curse for many dealers. It's
a blessing because rising

18

J U LY 2 0 1 8

rents reflect rising property
values, and a curse
because rising rents mean
higher fixed expenses and
lower earnings.
Rising rents are primarily
a result of rising commercial real estate values,

D I G I TA L D E A L E R . C O M

predominately driven up by
a decade of broad credit
availability and attractive
mortgage terms. As real estate values inflate, dealers
who own their real estate
have seen their enterprise
value increase despite

lower industry profits (see
Chart 2). According to Kerrigan Advisors' research,
on average, dealership
real estate prices have
more than offset the slight
declines in average blue
sky values over the last 18
months.
While increasing real
estate values are a
tremendous blessing for
dealers and their families,
particularly if they are
considering a sale in the
near-term, they are often
a curse for dealers who
are staying the course
or are looking to expand
their group. Rising rents, a
fixed rather than variable
expense, reduce earnings
and add risk to the auto
retail business model.
The fixed nature of rent
also hampers a dealer's
ability to manage through
economic cycles. During
the Great Recession, high
rent expense caused the
downfall of many dealers.
In the first quarter of
2018, average dealership
rent hit a level not seen
since the recession, rising
to $959 per new vehicle
retailed (see Chart 3).
These rent factors are an
alarming trend, particularly
given the recent decline in
new-vehicle gross profits.
In addition to rising real
estate values, rising rents
can be attributed to OEM
demands for new image
facilities and expensive
remodels. This is particularly true with luxury
franchises whose rent per
new vehicle retailed averaged a stunning $1,808 in
the first quarter of 2018,



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Table of Contents for the Digital Edition of Digital Dealer - July 2018

Digital Dealer - July 2018
Contents
Message from the Show Director
Learning Leadership From Coach John Wooden
Anatomy of a Dealership That Gets Superior Results
Internal vs. External Buy-Sell?
FOMO (Fixed Ops Manager’s Objectives)
So Many Used Cars, so Little Time
Dealership Real Estate – to Invest or Not?
Commentary: Online-Only Car Sales Are Hurting the Industry
Your Supplier Base Is Costing You Big Money
Interview With Kevin Frye of Jeff Wyler Automotive Family
To Text or Not to Text?
Figuring out What F&I Products Your Customers Need
Bridge the Gap Between Offline Car Sales and Online Actions With Facebook's Offline Conversions
The ‘BIG 5’ of Marketing Success!
10 Reasons Why Your Facebook Page Is Failing
Why Digital Retail Is Great News for Automotive
How to Drive Automotive Leads With Facebook
Digital Dealer - July 2018 - CT1
Digital Dealer - July 2018 - CT2
Digital Dealer - July 2018 - Digital Dealer - July 2018
Digital Dealer - July 2018 - Cover2
Digital Dealer - July 2018 - 1
Digital Dealer - July 2018 - Contents
Digital Dealer - July 2018 - 3
Digital Dealer - July 2018 - Message from the Show Director
Digital Dealer - July 2018 - 5
Digital Dealer - July 2018 - Learning Leadership From Coach John Wooden
Digital Dealer - July 2018 - 7
Digital Dealer - July 2018 - Anatomy of a Dealership That Gets Superior Results
Digital Dealer - July 2018 - 9
Digital Dealer - July 2018 - 10
Digital Dealer - July 2018 - 11
Digital Dealer - July 2018 - Internal vs. External Buy-Sell?
Digital Dealer - July 2018 - 13
Digital Dealer - July 2018 - FOMO (Fixed Ops Manager’s Objectives)
Digital Dealer - July 2018 - 15
Digital Dealer - July 2018 - So Many Used Cars, so Little Time
Digital Dealer - July 2018 - 17
Digital Dealer - July 2018 - Dealership Real Estate – to Invest or Not?
Digital Dealer - July 2018 - 19
Digital Dealer - July 2018 - 20
Digital Dealer - July 2018 - 21
Digital Dealer - July 2018 - Commentary: Online-Only Car Sales Are Hurting the Industry
Digital Dealer - July 2018 - 23
Digital Dealer - July 2018 - Your Supplier Base Is Costing You Big Money
Digital Dealer - July 2018 - 25
Digital Dealer - July 2018 - Interview With Kevin Frye of Jeff Wyler Automotive Family
Digital Dealer - July 2018 - 27
Digital Dealer - July 2018 - 28
Digital Dealer - July 2018 - 29
Digital Dealer - July 2018 - 30
Digital Dealer - July 2018 - 31
Digital Dealer - July 2018 - To Text or Not to Text?
Digital Dealer - July 2018 - 33
Digital Dealer - July 2018 - Figuring out What F&I Products Your Customers Need
Digital Dealer - July 2018 - 35
Digital Dealer - July 2018 - Bridge the Gap Between Offline Car Sales and Online Actions With Facebook's Offline Conversions
Digital Dealer - July 2018 - 37
Digital Dealer - July 2018 - The ‘BIG 5’ of Marketing Success!
Digital Dealer - July 2018 - 39
Digital Dealer - July 2018 - 40
Digital Dealer - July 2018 - 41
Digital Dealer - July 2018 - 10 Reasons Why Your Facebook Page Is Failing
Digital Dealer - July 2018 - 43
Digital Dealer - July 2018 - Why Digital Retail Is Great News for Automotive
Digital Dealer - July 2018 - 45
Digital Dealer - July 2018 - How to Drive Automotive Leads With Facebook
Digital Dealer - July 2018 - 47
Digital Dealer - July 2018 - 48
Digital Dealer - July 2018 - Cover3
Digital Dealer - July 2018 - Cover4
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