consider vertical development along with mixed-use instead of a freestanding, dealer-only facility. Pella: Given the increased density of their surrounding areas, dealerships can remake how they utilize their existing footprint by consolidating their dealer operations and creating available land to build commercial real estate. They’re sited next to existing infrastructure with roads, utilities and, in many cases, public transportation. As a dealer, you’ve got the opportunity to think about how your dealership can become part of today’s lifestyle while tying into the surrounding community. Consider experiential retail: people shopping, sitting outside, having a meal, enjoying live music — a place where things are happening. Experiential retail recognizes that the most successful mixed-use developments are fully activated spaces that provide a variety of amenities. Smith: As land gets more valuable and density becomes a requirement, Manhattan may be the place to look for models of what dealerships can look like. BRAM Group’s Toyota and Lexus of Manhattan have a high-rise presence with new cars on the fourth floor, used cars on the roof and a second lot in New Jersey to hold additional inventory. On the West Coast, Toyota of Hollywood has partnered with Houstonbased Hines and announced its plans for a mixed-use project, including a high-rise residential tower, a residential village, an office building and a public plaza with green space along with retail and dining. What’s being done in dealership design today to address where the automotive marketplace is moving and ensure that dealers are best positioned to meet tomorrow’s needs? Smith: In major metro markets, vertical development is starting to take hold in auto retailing, and that helps counter high land prices. Dealers are also re-evaluating the space devoted to service versus sales. In select, densely populated, urban areas, we’re seeing lifts used to put service bays on the second, third and fourth floors, with mixed-use residential on top and parking somewhere in between. In coastal areas, parking decks can help protect against hurricanes, and in areas prone to hail damage, they can help you save on insurance costs. Stancill: Online sales, lower vehicle inventories and consolidation all make it easier for dealers to downsize their variable operations while building out their fixed operations. It costs less per square foot to build service and parts space than showroom space. In fact, a lot of dealers who’ve completed recent facility initiatives are ready to further expand their fixed operations — in some cases, more than doubling the size of a service department built just a few years ago. We’re being very thoughtful about putting infrastructure in place as we plan dealerships, thinking about the location of utilities and how the building components are set up to make future expansion easier and less expensive. Planning dealerships for service growth from the ground up is a smart approach. For example, we always try to work with the dealer to think about future parts and service expansion during the initial design to make tomorrow’s expansion as painless as possible. We’re also seeing a greater investment in technician spaces, such as larger and more comfortable locker rooms and break rooms. The goal is to look at anything that will help attract and retain top tech talent in a highly competitive labor market. There’s also a focus on designing parts and service departments to accommodate EVs, with particular attention to the safe storage and handling of EV batteries. The “skateboard” batteries in EVs are almost the size of a car. They’re exceptionally heavy, and the parts area in a typical dealership isn’t designed to receive or store them. Plus, batteries pose additional safety and fire hazards that need to be considered in facility designs. What challenges are dealers facing today when they undertake dealership construction projects? Smith: We know EVs have fewer moving parts than internal combustion engines, but with the unknowns about EV service patterns and adoption rate, deciding on the optimal number of service bays may be a bit of an educated guess. In select instances when you’re moving service areas higher, you’ll also need to plan for additional infrastructure to support the added weight of EVs. The faster chargers that OEMs are requiring dealers to install have much higher power needs and will require more investment. A Level 2 charger may cost $30,000, but installing Level 3 chargers can cost $500,000-700,000 from start to finish. Coordination with utility companies can be a lengthy process — the fastest chargers draw enormous amounts of electricity, and local utilities sometimes require a dealership to upgrade its power-handling capacity first. Sometimes the utility provider can’t provide enough power without a line extension or other major work. After learning what’s required, getting the permits and components lined up for a charger installation adds significantly to your project timeline. Also, solar panels could carry some of the load, and depending on where you’re located, there could be tax rebates or grants to offset the cost of installation. Stancill: One of the big problems now is scheduling projects. Everything takes longer than expected because the construction world has such limited availability, whether it’s people, products or services. With architects backed up for months, it’s often impossible for dealers to complete a facility by the dates specified in their OEM agreements. Hard bidding, which many dealers strongly prefer, makes it more difficult to complete a project on time. These days most contractors simply won’t bother hard bidding a project — even a very lucrative one. They’d rather be a partner in figuring out how to compress the schedule and lower project costs without the risk of a fixed price. Dealers should be flexible in negotiations and be prepared to make their case for extended project timelines to OEMs. vada.com 21
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