Closed car dealers create unique sites

Car dealerships dot the landscape like icons of Americana, but as Chrysler negotiates bankruptcy and General Motors teeters on declaring Chapter 11, almost 2,000 car dealerships connected with those automakers will lose their franchises, forcing many out of business.

What then can replace or reuse these unique businesses to turn them into profitable real estate? One Realtor working in Westchester said odd as it sounds, banks and pharmacies are currently the most promising new use for old car lots, but elsewhere in the Hudson Valley there are only conjectures with no certainties.

Chrysler has announced plans to close some 790 of its 3,200 dealers nationally including 28 in New York state, including dealerships in South Salem, Brewster, and Fishkill, Roscoe, Port Jervis and Monroe.

General Motors has 6,375 dealerships nationally and plans to close 400 annually through 2012. The company has not announced which dealers will be affected by the decision, but as with Chrysler it is almost certain there will be local dealerships cut off by GM.

“We already have two former dealerships listed right now,” said Joseph Deegan, president of Deegan Sanglyn Realty in Kingston. He said he knew of at least one other local dealership that he suspected might not make the coming cuts.

He said there is logic behind the closures that does not necessarily bode well for re-use.  “Generally, the dealerships that are going to survive are probably very well located,” Deegan said. “The ones that aren”™t going to survive are on secondary streets, which is probably part of the reason they fail and which make re-use more difficult.”

Concern about their future is already being expressed by some dealerships in Westchester, according to John M. Barrett, first vice president of sales for Massey Knakal Realty Services. The company is headquartered in Manhattan, but Barrett said his clients are in Westchester.

“There have been many owners who over the last 3-4 months have become interested to find out the current value of their properties in today”™s market, due to the fact that they might be closing up shop or might be forced to close up shop when their contract are not renewed,” said Barrett.

So Barrett and his colleagues “have gone out and done evaluations,” he said, and have learned that the most interested parties in acquiring former dealerships are banks and pharmacies. “Car dealerships are typically in high-traffic areas, which is what is appealing to the banks and to the drug stores,” Barrett said. 

He said that in recent years banks and pharmacies had focused on developing “penetration into each market and we see that they still have interest.”

This does not necessarily mean redundancy, he said, but could mean that the banks and pharmacies are nearing the end of a current location”™s lease or a structure”™s useful life and are looking to relocate into a new facility in a heavily trafficked location. “There are still some banks out there and some drug stores out there looking for prime space,” he said.

Deegan noted that if re-use is desirable, “The good news is, typically these buildings have large open spaces with not a lot of load bearing walls,” Deegan said. “In other words, total renovation flexibility. I don”™t”™ have to worry that wall can”™t be moved because it”™s holding up the roof.”

But he is also realistic. “The other extreme, is they may be a good candidate to be torn down. Typically dealers have a lot of land, its value is its land, and it”™s cheap enough to rip it down and look at residual value of that land.”

As to what uses he could envision, Deegan said that “discount retail” comes to mind due to his belief that the closed dealerships will not be in prime locations. Medical offices are also a possibility he said. “People will travel some distance to a medical practitioner. It depends a lot on what can get financing. So who knows?”

Both Deegan and Barrett raised a caution flag about the past use of dealerships, with automotive repair operations sometimes creating tainted plumes from oil products. Both noted, however, that parent companies have been diligent in recent years assuring that environmental safeguards were utilized, reducing the chances of serious problems being found on the lots.