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Comment: Commercial Property Implications of the Diesel & Petrol Ban

Global real estate consultancy Cushman & Wakefield have given their thoughts on what the governments’ internal combustion engine means for commercial real estate.

The announcement on Tuesday, February 4th signalled the governments’ intention to ban the sale of new petrol, diesel and hybrid cars by 2035, a move that has had left many businesses urgently needing to adopt a new strategy.

Cushman & Wakefield’s Tom Rigg

Tom Rigg (pictured right), Head of UK Automotive & Roadside at Cushman & Wakefield gives his thoughts on the ban in full below:

“The Government’s announcement on Tuesday to bring forward a ban on the sale of cars using internal combustion engines (ICE’s) to 2035 was unexpected.

It has been criticised by both green groups for not going far enough, and on the other hand by a weakened automotive industry and wider business community that needs to even more urgently adapt.

The UK vehicle fleet (the total number of cars) is around 33 million. The latest government figures (2018) showed there are 56,000 battery electric vehicles (BEV) on the road (less than 0.2%). Whilst new BEV registrations rose 144% in 2019, it is still a very low base level, and we now need to ramp up exponentially to nearly 2.5m vehicles a year through to 2035. On a straight-line basis we will need to be selling close to 1m new BEV’s per year by 2025, last year we bought less than 4% of that figure. There is a lot of structural change which needs to take place, and we consistently hear about the lack of electric chargers available and the high (environmental and financial) cost of buying a BEV. The irony is that the current trend is more towards SUV’s than BEV’s.

In the property world, fifteen years is not a long time, and it is generally shorter than most new automotive sector leases, and long income funding requirements. Asset managers are increasingly cognisant of changes facing the automotive sector (car dealerships and fuel stations), but should they be worried?

The overarching theme is that change leads to investment; manufacturers are sharing technology and investing multiple billions in new technology (VW: $60bn over five years), they are establishing new alliances and mergers, car dealer groups are already rolling out programmes of installing charging infrastructure at their sites to cope with display and servicing requirements and upgrading electricity supplies. Their franchise branding will adapt to position them as electric leaders, requiring cap ex on their buildings.

New petrol forecourt developments now have charging points to cater for the shift to electrification, with increased dwell time leading to more shop sales, coffee being the stand out performer. In the fuel market, the theme amongst oil companies and petrol retail groups is one of expansion rather than contraction. Site closures are weak, tertiary sites.

One impact of an electric vehicle fleet is reduced workshop servicing/repair revenue (through fewer moving parts). Curiously, the need for workshop space is more likely to increase over the next 20 years, with the dual pressures of dedicated areas for electric vehicle maintenance with specially trained technicians and an established conventional engine vehicle fleet still requiring maintenance.

The ownership challenge is harder to predict. You might expect me to say that drivers will still want to ‘kick the tyres’ at a car dealership even if they don’t own the vehicle and take it for a test drive, that they will want to take advice from a retailer when they haven’t driven this type of vehicle before. You might also expect me to say drivers won’t opt for a shared ownership rental model because families and individuals want to keep their own wellies in the boot rather than remove personal effects like children’s car seats after a journey.

Whatever the outcome, we are driving more, not less. A vibrant and connected society relies on people getting around efficiently and in a timely manner. The Government has much work to do to live up to its aspirations.”

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