Car wash trends to watch in commercial real estate

Above: Photo by Tony Elliott, Velocity Retail Group. Real Estate | 27 Jun |

The Phoenix area is awash with a new breed of car washes as the industry is experiencing a transformational change from the traditional model to the value-oriented express car wash.  These offer high quality bay washing and free ancillary services such as towels, power air, and vacuums to name a few.  With over 100 express locations throughout the metro area competition is becoming intense amongst operators to secure parcels and build new units.  Consumers are getting what they want — more choices, more convenience, and more value than ever before. 

Dave Cheatham is president of Velocity Retail Group.

The shift in the industry has occurred due to a number of factors.  The first is labor.  The minimum wage has risen in the last two years and will continue to rise.  This increased cost coupled with the tightening for employers hiring practices and E-Verify have created an economic and labor shortage crisis for those running full-service car washes.  Another factor is that the technology has improved with the new in-bay automatic car was tunnels.  These newer units are producing a better result with a cleaner and dryer car.  These factors combined with the demands from customers who want more and more value have brought about the shift in the industry that is creating a proliferation of express car wash locations.  These express models require very little labor and the technology of these units has improved to the point that the full-service, hand-wash, hand-dry operators are feeling the pressure and many of the older self-service bay units are being washed out. 

Express car wash units currently out-number full-service by a 2 to 1 ratio in Phoenix. Many full service operators are combating the change by adding express lanes to their offerings to stay competitive.  Many operators offer additional amenities which are also added conveniences for their customers and include pet wash areas, quick lube/oil changes, convenience stores, vending machines, car detailing and gas.  Improving the customer experience drives the evolution of retail, and these changes do just that. 

Lastly, the business model is evolving as operators encourage subscription services for their customers.  Subscriptions and clubs are offered at most of the companies, with competitive pricing.  On average an unlimited “basic” subscription can be purchased for less than $16 per month.  This monthly fee is the equivalent of one full-service wash and provides more convenience along with affordability.  The customer can visit as many times as they want for one low monthly price.   This supports the fact that the pricing model has decreased while services have increased.  The bottom line is consumers want value, and these new car washes and subscription offerings deliver on that.

Many wonder if there is a bubble coming on the horizon.  This can be observed in some areas of Phoenix that have two or three different car wash operators within blocks of each other.  While competition is generally a good thing, the close proximity of competitors will ultimately cause a disruption in the industry and we will see a transfer of market share as inferior locations and older properties will either be rebuilt by their owners, or simply close.  The elimination of weaker players will be more prevalent as newer units come on line and consumers shift to their state-of-the-art facilities. 

What’s next for the industry?  Operators will continue to seek new sites or convert older models to newer technology.  Change is occurring in all facets of retail, restaurants and services which all rely on the consumer. Those that embrace change, and focus on providing lower prices while adding services and conveniences will rise to the top.

 

Dave Cheatham is president of Velocity Retail Group.

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