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Apartment Buildings Above Dealerships? See What One Toyota Showroom Is Planning

Feb 17, 2021 by Laura Agadoni
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A Silicon Valley Toyota dealer wants to construct an 88-unit apartment building over an existing showroom and might do this with up to three more of its dealerships. The reason: to help offset costs. Could this become a trend among car dealers or spread to other sectors?

The typical car dealership

Most car dealerships are one-story affairs with a display lot, showroom and sales center, and a service facility. If that dealership's location sits on pricey real estate, though, it might be cost prohibitive and not be the best use of space.

The issue

Car dealerships want to be where the people are. Expensive real estate markets can be target-rich environments for a dealership's customer base. So dealers want to stay in these expensive areas, like Silicon Valley, but there comes a point where it's just too expensive.

The idea

When rising land values increase too much, developers often build up rather than out. In this case, Price Simms Auto Group, a family-owned group of car dealerships in the Bay Area, plans to build an apartment building over up to four of its locations. The apartments would help pay the cost of keeping their car lots in expensive real estate locales.

A twist on an old concept

Many old retail sites experience functional obsolescence, losing value from not serving the needs of the community anymore. These places are often torn down and replaced by new buildings.

Many new buildings have private residences above retail stores. That's nothing new. But usually you find coffee shops, casual dining establishments, convenience or grocery stores, small workout facilities like a yoga or Pilates studio, and maybe a bicycle shop. But a car dealership? That's a new one.

A win-win

In pricey real estate markets, there tends to be a shortage of housing, and that shortage of housing tends to drive prices up even more. The idea of building housing above a car lot addresses two economic problems: Make the land do more than just serve as a large parking lot and provide much-needed housing. Probably nowhere in the country is affordable housing needed more than the Silicon Valley. Combining housing with retail, in this case, cars, seems to make sense.

In the case of the Price Simms project, it will reconfigure the Toyota dealership to have the repair shop in the basement (to eliminate noise for residents on top), the showroom and sales office on the ground level, a multi-level parking deck above the showroom, and an apartment complex on the top floors.

The Millionacres bottom line

A car dealership probably isn't the first thing that comes to mind when designing a mixed-use facility (housing and retail). But when you think about it, you might say, "Why not?" Innovative ideas can solve problems, and this one looks promising. Investors should look at this model because we may be seeing more of it in the future.

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