Corporate identity standards pressure gives rise to dealership expansions

Small dealers are feeling the financial strain that comes with larger property costs as well as the pressure of keeping up with increasingly demanding corporate standards, according to estate agent group Knight Frank.

The property giants claim that the average car dealership lot price has risen to between £7m and £10m , which is a cost that many independent dealers are struggling to meet. However, in a bright note, it said that the industry looks very healthy and that this can often be measured by the number of business-to-business transactions that have taken place. Knight Frank's Automotive Capital Markets research said: "We calculate there has been over £500m of corporate acquisition activity making it the most active 12 months for over a decade."

Dealers looking to take advantage in the booming market conditions, while ensuring they are not left out of pocket after investing heavily in new premises, need to ensure they have up to date motor trade insurance to include new premises and stock.

Knight Frank explained that a number of dealership chains have been particularly active in expanding through acquisition in recent years, including Lookers, Group 1, Vertu, Sytner, Jardine and Marshalls.

Expansions is often a response to pressure from the manufacturers to keep up with corporate identity standards, which can results in expanding premises, more stock and pricier equipment.

The property specialists added: "We envisage this trend continuing as profit margins for smaller groups come under pressure and exacting corporate identity requirements give rise to the need for regular capital investment in dealerships, or even relocations and new builds, which many of the smaller groups are unable to finance."