Transcripts

GM's Axe Falls on 1100 Dealerships

SUSIE GHARIB: Another round of bad news for car dealers today. General Motors told 1,100 of its dealers to close shop as the struggling auto maker prepares for possible bankruptcy June 1. GM said most of the closings will happen next year, the first step in reducing its sales network by 40 percent. Just yesterday, Chrysler announced a big reduction in its dealer network. The shutdowns are expected to result in thousands of job losses, another blow to the U.S. economy. But another, less obvious economic impact is how the closures could affect the commercial real estate market. Scott Gurvey reports.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The closing of auto dealerships will flood the already depressed commercial real estate market with property. How the land will ultimately be used will depend on local market conditions. Suburban locations where many dealers are located are often highly valued. Many dealerships have been in business for decades, are family owned and own the land. That land value may be the only thing left once the dealership is shuttered. Thomas Tourso of developer Eden Property recently bought an almost two-acre New Jersey dealership that folded. He's about to open a 28,000 square foot shopping center at that site.

THOMAS TOURSO, PARTNER, EDEN PROPERTY CO.: We basically look for sites for a Walgreen's with auxiliary uses. I think there'll be a lot of opportunity with all these dealerships closing. Unfortunate for the automotive industry, but for the few people that are out there still developing and still working with strong tenants, I think there is definitely some opportunity.

GURVEY: The auto dealerships that will close will be the latest addition to the growing problem of a glut of commercial property now available in this recession. Some agencies which specialized in real estate services are now working on dealership sales. Owen Cone of Miami- based Colliers (INAUDIBLE) has 25 dealer clients and expects that number to double over the next few months.

OWEN CONE, SENIOR DIRECTOR, COLLIERS: It depends on the real estate and where you are and what the circumstances are and whether it's a good retail site or if it makes another good use. You know, we've sold properties for use as a hospital, office buildings, retail centers. Wal- Mart is a big shopper these days for real estate. It really just depends on the site.

GURVEY: The sale of some of these dealerships may run afoul of local zoning laws. That's because some local governments tried to maximize sales tax revenues restricted use of the land to auto dealers and nothing else. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.