Automotive Properties in High Demand for Real Estate Investors
Net leased automotive properties have become popular, low-risk assets for commercial real estate investors. Private and publicly traded real estate investment companies are actively acquiring sites and becoming landlords to parts retailers, service shops, and gas stations for three reasons: The future state of the U.S. automotive market. The high demand of their tenant's products and services. The corporate guaranteed escalating lease structure.
As new car prices remain stable due to the chip shortage and supply chain constraints, more drivers are keeping their current vehicles on the road longer. The average owner keeps their car for 12 years. The length of ownership time may increase in coming years, because of the economic downturn and recent tech sector layoffs nationwide. Automotive parts and service businesses reap the benefits of the changing market.
Big name automotive parts retailers like Advanced Auto Parts and AutoZone have brand recognition, with a strong tenant credit rating. Time sensitive customers can purchase parts immediately from a brick-and-mortar location, instead of waiting to be delivered from an e-commerce store. Price sensitive car owners shop for the best deal on automotive services. Service providers like Express Oil Change, Jiffy Lube, Goodyear Tire, and Caliber Collision typically offer dealership quality repairs at a slightly discounted price. Some even offer mobile repair services. Consumer brand recognition and increasing demand for their services make them attractive tenants to net leased investors.
Automotive net leases are typically guaranteed by the corporate franchisor. This means that in the event of a franchisee default, the national corporation will back end the lease and continue paying rent. Rent escalations are typically built into automotive leases, both for credit rated and non-credit rated tenants. Rent bumps may not be included in other asset classes. This means automotive net leased investments are a secure way to hedge against inflation.
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Express Oil Change
1479 Hudson Bridge Road
Stockbridge (Atlanta MSA), GA
Price: $2,661,000
Cap Rate: 5.50%
NOI: $146,336
Rentable SQFT: 3,754 SF
Year Built: 2008/2015
Lot Size: 0.44 +/- Acres
Lease Type: Absolute NNN
Interested? Learn more about our Retail Loan Programs!
Credit: Sambazis Group and WealthManagement.com