Developers see opportunity in car-dealer lots
GM, Chrysler woes may spur stores, hotels
With dozens of car dealerships in Massachusetts scheduled to be closed, real estate developers are looking to replace the soon-to-be-empty showrooms with stores, hotels, and office buildings.
"This potentially represents a sea change in the availability of commercial real estate," said Len Bierbrier, president of Bierbrier Development of Lexington. "You never see this many terrific opportunities to acquire usable land."
Bierbrier is working from a list of 35 Eastern Massachusetts dealerships, trying to find locations that could support shopping centers or mixed-use developments. Some of the dealerships on his list are still operating, and Bierbrier is trying to be respectful of owners who are still seeking to save their businesses, he said.
He intends to acquire some of the properties in coming months and will spend the next year or two securing permits for his redevelopment plans.
"The point is to have the inventory [of properties] ready to go by the time the recession is over," Bierbrier said.
This month, Chrysler said it would soon close 12 dealerships in Massachusetts, while General Motors said it would close an undisclosed number by the end of 2010.
A Massachusetts lawyer who is working with some of the dealers previously told the Globe that General Motors will close at least 12 of its 96 outlets in the state.
And there are already another 56 car lots for sale in Massachusetts.
"A week doesn't come and go without a new car dealership coming available " said J.P. Plunkett, a senior brokerage director at Cushman & Wakefield, a real estate services firm. "These may be the first [commercial] properties to move once the economy starts to improve."
Even before this new round of closings, the retail auto sector in Massachusetts had been contracting. Eighty dealerships have closed in the state since January 2007, according to the Massachusetts Automobile Dealers Association.
In some cases, the dealers own the lots on which their dealerships sit; in other cases, the automakers own the land. Still other lots are owned by third parties.
The average asking price for the 56 car lots currently on the market is $1.49 million, according to
Several dealers have pledged to fight the carmakers' planned closings, so it's unclear just how many properties will become available for redevelopment. Moreover, the large inventory of lots could make it difficult to sell all of them.
Still, some of the dealers said they are already getting inquiries from developers - often to their dismay.
"It's like someone approaching you at a wake and saying, 'Do you want to sell your property?' " said Jim Bickford, whose family owns Westminster Dodge in Dorchester, one of the dealerships Chrysler is seeking to close.
Bickford is among 284 dealers who have petitioned US Bankruptcy Court in New York, which is overseeing Chrysler's reorganization, for more time to try to save their businesses.
"A lot of people take it for granted that you're going to close, but I'm fighting this," he said. "I even have auctioneers calling. It's way too early for any of that."
The redevelopment of auto dealer lots is expected to unfold gradually, and many are likely to languish for several years. The down economy is making it difficult to find tenants; some retailers, for example, are closing stores, not opening new ones.
That means developers may have to assume more risk than they would like, something they are loath to do in this economic environment.
Still, a confluence of events makes it a great time to explore business opportunities: Real estate values have declined, and the owners of vacant car lots, and those that are about to be vacant, may want to sell.
Among those shopping for development sites is
"We're looking at a number of dealership locations," said Paul Beck, a vice president at Gershman, Brown & Crowley, a Rhode Island real estate firm. "We're aware of a dozen or more sites" in Massachusetts and Rhode Island, he said.
Competition for the best locations is typically fierce. CVS will probably be vying for sites with competitor
The range of potential uses for the properties is limited, since many are in locations that would work only for retailers. What happened at the Berejik Motors site in Needham was typical: It was redeveloped as a mall with a
Some developers are trying to be more creative. In Sacramento, city officials are considering plans to turn a string of empty dealer lots into a new neighborhood with housing as well as commercial buildings. Scottsdale, Ariz., officials are contemplating similar plans for a largely vacant auto dealer strip.
Those kinds of developments require large swaths of land, meaning a closed dealership would have to be combined with several surrounding parcels.
Douglass Karp, executive vice president at New England Development, said his firm often looks to combine auto lots and adjoining sites so it can build full-scale shopping centers, typically with a supermarket.
"If it's a unique location, you're going to want to take advantage of that opportunity," said Karp, who is looking at several dealership properties. "Some of these sites are once-in-a-lifetime locations for retailers," he said.
Casey Ross can be reached at firstname.lastname@example.org.