Just when you think you’ve figured out most of the major trends happening in commercial real estate investment, something will throw you for a bit of a loop.
It turns out that car washes are a very sought-after property investment by several firms, according to a recent GlobeSt.com article.
This has reportedly become popular in the net lease sector of the business, where competition is strong for drug and dollar store sites that are on well-traveled corners. Well, car washes obviously get a lot of traffic, they are Internet immune and surely generate plenty of revenue if it’s the correct operator and location.
GlobeSt interviewed two executives from Hanley Investment Group, which is based in Corona Del Mar, Calif., and specializes in net lease assets. It has completed a few of these transactions recently, and CoStar said that in roughly the last year, 12 deals were done by net lease firms in this part of the sector, reportedly a 450-percent increase over between March 2012 and the same month last year.
One asset, in Los Angeles County, that Hanley traded, the company said, went for a 3.8-percent capitalization rate.
The International Carwash Association said that the number of people who manually wash their cars has dropped significantly in the last 10 years. This has helped increase the interest in car washes as an investment. The organization gives some helpful hints on carwash site selection for curious buyers.
Other than zoning issues, a topic that most commercial real estate investors are very much acquainted, it mentions the importance of adequate signing ordinances, synergy with other businesses in the neighborhood being considered, the ability of suppliers to make easy deliveries to the location, as well as other similar matters.
Also, the average car wash costs about $1.5 million to get up and running from an operational standpoint, the association points out.
An article last year in the Houston Chronicle said that annual revenues for a car wash can hit about $900,000 depending on the success of the location. Meanwhile, the average construction space is reportedly about 1,700 square feet, though finding a secure, well-traveled location is the most important consideration, taking land costs into account.
If this property type is taking off for net lease investors looking for strong returns in an asset class that might be overlooked by many commercial real estate purchasers, finding the right operators the maintain the business is key, just as if one would want the best drug or dollar-store company to run the site.
If high returns can be realized on a consistent basis, maybe we could see this as an up-and-coming investment in a net lease retail arena that is filled with major buyer competition.
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