Dealer turns grocery store into car center

Industry

Vacant commercial storefronts — the real estate remnants of retail consolidation and the ongoing consumer trend toward shopping online — litter urban and suburban landscapes across America.

But in Milford, Conn., when a 35,000-square-foot grocery store closed next door to his Toyota dealership, third-generation dealer Bobby Crabtree spotted a retailing opportunity in that vacant building. This spring, Colonial Toyota opened what it calls an indoor car center in the former grocery store, bringing a significant portion of its inventory out of the elements and under a roof. And the effect, Crabtree says, was nearly instantaneous.

“It was like we lit a fuse. We opened the doors to this indoor car center, and boom, we’re selling an extra 50 cars a month,” said Crabtree, the owner of Colonial Toyota. “We went from 250 or 260 new and used a month to 300 or even 320.”

The whole process was not instantaneous, but something Crabtree and his team worked at over several years. But even in these early days — the car center’s added value remains as yet untested through Long Island Sound’s rugged winter weather — Crabtree says the building is already boosting business and adding profitability in unforeseen ways.

“I like to call this our Louisiana Purchase, because it doubled our size from 4.5 acres to almost 9 acres, and in the Northeast, that much real estate is kind of unheard of,” Crabtree said.

It took Colonial a year to renovate the building: gutting it, sandblasting the floor, converting its former 10,000-square-foot stockroom into a 10-bay prep area and photo booth, and doing other interior and exterior improvements.

The cost of the renovation project was $1.7 million — a 42 percent bump above the building’s $4 million price tag. The exterior renovations were done to match the dealership’s facade, while inside, the store’s support columns serve as makeshift street signs to highlight different vehicle lines.

But it’s already broadened the dealership’s appeal, Crabtree says. “We’re attracting people from greater distances. And we don’t talk about price or don’t talk about gimmicks in our advertising. Now it’s the presentation of the car. And when you walk in, you look at over 100 cars as though they’re outside.”

The opportunities to repurpose existing retail space into an indoor showroom are growing in most markets across the nation. According to the National Association of Realtors’ most recent quarterly Commercial Real Estate Trends and Outlook, retail space had the highest vacancy rates among the commercial asset classes. The sector also had the lowest sales activity among commercial real estate classes, the survey said.

Prior to adding the indoor car center, Colonial’s vehicle prep area had been a bottleneck in its sales operation, with customers often having to wait while their new vehicles were prepped for delivery. Since the center opened, though, most of the vehicles parked inside are already largely prepped for delivery — meaning they’re ready to go when the financing is done, Crabtree says.

“Because of the indoor car center, we’re getting people in and out so much faster,” he says. “There are still plenty of cars outside, but many times, customers take the car in the showroom that is clean and ready to go.”

There were other expenses as well. Colonial added another sales manager and bolstered its sales team to keep its new facility staffed, and of course, there are additional expenses for utilities, taxes, maintenance and other fixed costs, Crabtree said.

“When you take on this kind of additional expense, you can’t have a lot of fat. Although the expenses did go up, in a weird way, it was healthy, because the expenses that went up were directly related to sales,” Crabtree explained. “Where we increased our expense, we fortunately increased our gross. Year to date, our net to gross is up every bit of 10 percent.”

What remains to be seen is the effect Colonial’s indoor car center has during New England’s long, sometimes brutal winter. Given its fair-weather performance, Crabtree said he’s optimistic about how consumers will respond to the opportunity to step out of the cold when they’re shopping for a new vehicle.

“Frankly, we were expecting the surge to happen in the winter,” Crabtree said. “In the wintertime, it’s going to be that much more of a selling point.”

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