Cities Taking New Ideas for Vacant Auto Lots for Test Drive

March 3, 2010
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Facing a revenue void, Whittier, Calif., city officials are looking at opening vacant car lots for retail and office space. And many other cities in the state are following suit as they realize that auto malls no longer are profitable. For decades, cities have set aside vast expanses of land for auto malls and the dealerships have rewarded them with a steady flow of tax dollars, often providing 20 percent or more of an average town’s sales receipts. But, pushed out of business by the recession and a retrenchment at General Motors Co. and Chrysler Group, dealerships in the state have closed at an accelerating rate, leaving roughly 9.1 million square feet of empty buildings sitting on more than 1,000 acres of prime commercial real estate. The changed landscape has left cities scrambling to make up the lost revenue.

However, industry analysts believe that auto centers are not about to disappear. Rather, new franchises will reoccupy some of the shuttered dealerships once the economy improves. Free-standing vacant dealerships increasingly are being considered ideal for medical, retail, or industrial companies.

Some of the shuttered dealerships have already reopened as used-car lots or car service hubs, though reinventing them for other uses can be tricky because older properties could have underground storage tanks and lubricant seepage that could be costly and time-consuming to clean up.

Whittier city officials are shifting away from auto-specific zoning for areas with vacant auto malls that are unproductive and losing hundreds of thousands of dollars in sales taxes for the city. The city now is looking at other types of retail, such as furniture stores or even mixed-use office and condo buildings.