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Excess parking: lots of opportunity

By Jon Springer

Some people look at a shopping center parking lot and see it half-empty. For Greg Rich, it's half-full.

Mr. Rich knows that excess parking space can mean extra money for both landlords and tenants of the center, not to mention himself. He's the director of site development for Owner's Auto Mart (OAM), a Sioux Falls, S.D.-based "for-sale-by-owner" chain of automobile display lots. Owner's Auto Mart, which has grown to 62 dealerships in five years and recently began franchising, seeks to locate its display lots in shopping centers with excess parking space.

The marriage between used cars and underused parking lots can be a good one, Mr. Rich said. His business and clients enjoy the advantage of a highly visible location and convenient transactions. The shopping center benefits from increased traffic, greater awareness and a previously untapped source of revenue.

Owner's Auto Mart does not sell cars directly; rather, it provides a display lot, staff and advertising for private parties to buy and sell vehicles. An OAM franchise secures a site by renting anywhere from 25 to 150 excess parking spaces on a monthly basis. Car sellers then rent a space from OAM on a weekend, weekly or monthly basis. The cost to car sellers is usually between $20-$30 a week, depending on advertising costs in the area.

The franchise provides advertising for the vehicle in newspapers, as well as signage, security and insurance at the lot. Staffers at the lot (usually three) have ignition keys and can take potential buyers for test drives. Sales, however, are negotiated between buyers and sellers privately.

"We're not the middlemen," said Mr. Rich. "We're basically renters of real estate."

This arrangement has proven successful with private car sellers, who no longer have to arrange to show their cars and are contacted only after potential buyers have inspected and driven their vehicles. Those in the market to buy a used vehicle have the convenience of one-stop shopping and a low-pressure environment.

The shopping center in turn can pick up rent which ranges between $10-$15 per month per space, as well as exposure in the car ads and an additional attraction at the center. OAM generally rents 100-150 spaces a month at each center, Mr. Rich said.

West 12th Shopping Center, a 34,000-square-foot strip center in Sioux Falls,rents as many as 200 parking spaces per month to OAM. Kevin Roth, vice president, D.R.D. Rogers Co., Sioux Falls, which owns and manages the center, described the dealership as a "low-maintenance tenant" that has benefited the center in several ways.

"It's worked extremely well," said Mr. Roth. "From the landlord perspective, a big benefit is that they provide security and try to make sure there's a minimum of vandalism. We and our other tenants benefit from additional eyes watching the center during off-hours.

"I believe it has added traffic as well," he continued. "Between our center and the adjacent property, which has a Kmart, I think it's brought some additional people here, as well as developed a greater awareness for the entire property."

Owner's Auto Mart officials will look at any strip center, power center or mall with excess parking, Mr. Rich said. The ideal location is a large shopping center located in close proximity to its city's automobile row.

Excess parking is defined as spaces that exceed the amount required under zoning.

"You can find space in a center with a pad that they haven't yet sold, or in one in which the zoning requires them to have 300 spaces, but they have 400," Mr. Rich said.

"It's a continual battle to find spaces that are zoned properly for this," he added. "There might be a furniture store that looks like it has a lot of spaces available, but those spaces are there because of zoning. Sure, there's only 25 cars there at a time, but it's zoned for 300."

The company can make arrangements to clear the lots during busy times of the year, such as the holiday season, he added.

As the largest chain and first franchisor of for-sale-by-owner lots, OAM finds little competition for its locations, Mr. Rich said. Occasionally, he said, a center will invite a new car dealer to display in its lot for special events, but that's the only challenger OAM is likely to encounter.