Institutions See Appeal in Collision Centers

Before the pandemic, experiential retail was all the rage. Landlords were looking for e-commerce-resistant concepts that would draw people out of their homes and to their centers. The COVID shut everything down.

“Experiential was, between casual dining, Dave and Buster’s or Chuck E Cheese, definitely impacted the most by COVID,” says Randy Blankstein, president of The Boulder Group. The good news is that investors found other e-commerce related sectors in growth mode during the pandemic, specifically collision centers.

“The auto parts sector, servicing and collision are very much e-commerce resistant,” Blankstein says. “They did very well during COVID in the last year.”

In the meantime, competition is heating up among collision centers as companies, like Caliber Collision are in expansion mode as they look to steal market share from local operators. “These developers and tenants realize that if they can crank out these concepts, there is big investor demand,” Blankstein says. “It is a way to expand with a lot of interest in your properties.”

Part of the investor interest is driven by the fact that many don’t have a foothold in the auto sector with tenants like Jiffy Lube and Valvoline. “People have been under-allocated to auto service and collision because there weren’t that many auto service and collision opportunities,” Blankstein says.

Without a lot of opportunities, Blankstein says many institutions “moved onto other things.”

Now they’re trying to rebalance their portfolio.

“There is a big demand [from institutional investors] for diversification in their portfolios,” Blankstein says. “A lot of these companies are fully allocated on Dollar Stores and other QSRs. This is a new category for them to put some money into. So we’ve seen some institutions dip in their head into auto service centers.”

Blankstein says it could be a few years before investors’ portfolios will be overweight with auto centers. The good news is developers are building properties for auto service centers. “Jiffy Lube, Valvoline, Service King, Take 5 [Oil Change], Caliber and Bridgestone are all in an expansion mode,” Blankstein says. “You’ve seen a lot more Take Fives, a lot more Service Kings and a lot more Calibers.”

This growth is coming at a time when other categories aren’t expanding. “Outside of dollar stores and QSR, most people’s expansion is minimal,” Blankstein says. “It is mostly replacement of existing stores or relocations or a few new properties here and there.”

Auto service centers give these institutions a way to diversify into an expanding market. Also, there is strong investor demand for sale-leasebacks.

“They have this investor demand to do the sale-leasebacks, take the properties off of their balance sheet and buy their new development,” Blankstein says. “It’s a few years of clear sailing for these tenants. So they’re ramping up their development pipeline for the next few years.”