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The rising cost of land in city centers, an increased interest in walkable neighborhoods and growth in online car shopping have made urban dealerships tempting targets for redevelopment.

Standing on the outdoor terrace of an office tower being built on the west side of Los Angeles, one can easily see why the location is such a selling point. The Santa Monica Mountains lie to the north, the Expo Line light rail has a stop one block south, and the Pacific Ocean stretches westward.

But Dan Martin sees history: His family’s car dealership, Martin Cadillac, once the busiest on the West Coast, previously sat on the five-acre construction site; he was born in 1974, the same year it opened.

A massive bank of garages and maintenance bays where Mr. Martin used to fetch parts as a summer job will be replaced by 600 apartments. New office space, leased by Riot Games, and storefronts will stand where rows of flashy Eldorados and Coupe DeVilles once impressed commuters at the busy corner of Bundy Drive and Olympic Boulevard.

“This is an ocean of opportunity,” said Douglas H. Metzler, West Coast chief executive of Hines, the developer collaborating with the Martins to redevelop the site, called West Edge. “To do a pre-eminent project in Southern California, you need scale, you need quality, and you need density.”

The idea of finding new uses for car lots has existed for decades, but the transformation of Martin Cadillac illustrates how trends in real estate and the auto industry are rapidly converging. The rising cost of land in downtown areas and a premium on walkable commercial districts have recently made urban car lots tempting targets for developers. And with the move toward online car shopping, dealerships no longer need large sales spaces.

“The car dealership is not going away, but it may look a lot differently in urban centers in the next 10 to 15 years,” said Brady Schmidt, president and co-chief executive of National Business Brokers, a firm that helps owners buy and sell dealerships. “What dealers are hoping for, at least the dealers that I’m talking to, is to be able to get the best of both worlds: They want to redevelop these sites to include high-density housing and not have to sell or give up their dealership to do it.”

Strategically situated on busy intersections, dealerships offer some of the last — and largest — parcels of relatively easy infill development. Most consist of a few single-story buildings and large asphalt lots, and they require relatively minor environmental cleanup. Converting dealerships into dense developments is a sort of urban upgrade; car-centric space can become something more walkable, transit-connected and ideally more sustainable.

The redevelopment projects are popping up across the nation.

In Durham, N.C., Hines plans to break ground on the former University Ford lot this year, looking to expand the American Tobacco Campus, a redeveloped factory complex with retail, restaurants and events spaces.

The Price Simms Family Dealerships, which owns 14 locations in Silicon Valley and Northern California, plans to transform its Toyota franchise in Walnut Creek into a multistory showroom and residential project, with a smaller dealership occupying the ground floors of the project. The value of the business is being overtaken by the underlying value of the real estate, said Adam Simms, the company’s chief executive.

And two development firms in Wilmington, N.C., aim to turn an auto dealership next to a defunct Kmart into 298 apartments and stores in a complex called Paseo. “It was such a nasty eyesore,” said Mariana D. Molina, president and founder of Bella Vista Development, one of the firms on the project. “It’s a really car-centric community, and this is just a sea of parking.”

The roughly 18,000 new-car dealerships in the United States operate in a state of flux, according to industry experts. A rising interest in electric vehicles and increased online shopping, among other significant shifts, point to a future where these businesses offer different shopping experiences.

Stereotypical visions of endless rows of cars festooned with colorful plastic flags and inflatable sky dancers nodding in the breeze will give way to a smaller footprint for sales and more room for maintenance and electric vehicle charging infrastructure, said Inga Maurer, a senior partner and auto expert at McKinsey & Company. Electric cars will not need oil changes or powertrains replaced, but the increasing amount of sensors and electronics in them will still require visits to mechanics.

Despite these shifts, 75 percent of customers still view the test drive and on-site experience as a core part of their buying journey, Ms. Maurer said. And the franchise model for car sales means that even if consumers begin shopping online, they need to finish the transaction with the dealer.

For example, Price Simms’s plan aims in part to transform the Walnut Creek Toyota into an Apple store-type shopping experience, with high-end digital displays incorporated into the sales floor. The decision by company executives to be a part of the redevelopment is a reminder that because dealership owners have the right to operate only in a relatively small territory, they cannot simply sell their land and reopen across town at a cheaper site.

Even as electric-car brands like Tesla sell directly to consumers without a dealer, Ms. Maurer and others see little chance that the system will drastically change.

Last year, with record prices for used cars, a pent-up demand for repairs and increasing margins, dealers had a banner year, and 100 more dealerships opened than closed. But the number of franchised car dealerships has steadily declined from a high of about 47,000 in 1950, according to the National Automobile Dealers Association. Families that have owned dealerships for decades can see significant upside selling their land.

In Nashville, the Reed family’s Chevrolet dealership had anchored the city’s midtown since its patriarch, Jim Reed Jr., opened a brick building in 1930 to hawk automobiles. Generations of Nashville residents would recognize “Ol Jim,” a squat cowboy mascot who appeared on a billboard on Broadway to help peddle rows of Chevys.

During the last two decades of Nashville’s building boom, the city has grown up around the site, which sits near the upscale neighborhood of Gulch, Music Row and Vanderbilt University, said Vikram Mehra, a senior managing director at Hines.

“I couldn’t ask for more prominent real estate,” he said. “We’re creating a place that’s worth more than the sum of its parts. The whole mixed-use vibrancy is what people are seeking.”

Combined with a century-old Coca-Cola bottling plant, which Hines also acquired, the 12-acre Reed District, named to honor the family’s dealership, will create a dense “urban village” set to open in 2026, with commercial and retail space interspersed with a network of walkways. Antique signage from the Reed dealership, as well as classic Chevrolet models, will be refurbished and displayed throughout the development to add continuity and context.

Filling in the loose patchwork of urban landscapes is efficient because the sites are connected to transit, water and other infrastructure, and new residential developments won’t displace existing residents, said Ed McMahon, senior fellow for sustainable development at the Urban Land Institute. The California Legislature recently passed a law to simplify the conversion of commercial spaces to housing.

“There’s a demand for redevelopment in the suburbs in particular, and then the climate change imperative, which all moves toward more adaptive reuse,” Mr. McMahon said.

The vitality of these mixed-use developments is a draw to potential residents. Mr. Martin, for instance, plans to move into the West Edge development as soon as the apartments are ready. For him, the site will be a physical representation of the Martin family legacy: A huge window on the corner will mimic the showrooms that formerly displayed new sedans.

The Martins pushed to make sure 20 percent of the homes were affordable, a family priority, to help alleviate Los Angeles’s dire housing shortage. And by hitting those affordability metrics, the builders were allowed to build higher and add more apartments.

“We didn’t want to sell, take the cash and leave,” Mr. Martin said. “When you’re operating on a property for that long with your name on it, it’s important to stick with it.”

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With a competitive shopping season just a couple of months away, brokers and e-commerce executives share their tips for small businesses looking to stand out.

Even though we’re only at the tail end of summer, retailers have already spent months gearing up for the holiday shopping season.

And due to a tornado of factors — including inflation, supply-chain woes and consumer spending habits that changed during COVID-19 lockdowns — retailers are looking ahead to a shopping season that promises to be even more challenging than usual.

It’s critical to prepare for the holiday season, because Black Friday and the weeks beyond can make or break a brick-and-mortar store, says Richard Rizika, partner and co-founder of Beta Agency, a commercial real estate agency based in greater Los Angeles. Rizika was also a vice chair in the retail services group at CBRE, one of the world’s largest commercial real estate investment firms.

“Many of the merchants haven’t made money this year and are counting on that push through the holiday season to produce the profits,” Rizika says. “If things fall flat, or you miss the merchandise or the consumer just doesn’t show up, it can be tragic.”

Thankfully, there are things business owners can do to set themselves apart amid a shopping environment that's even more cutthroat than usual.

1. Get the word out about holiday sales early

Gone are the days of customers idly wandering the neighborhood or the mall and popping into stores. Today’s consumers are doing far more research before stepping foot into a store than they ever have, says Sean Turner, co-founder and chief technology officer of Swiftly, an e-commerce technology company.

“I think the biggest thing is being able to get the word out to consumers effectively to celebrate the savings and deals that they have,” Turner says. “Consumers have gotten a lot more planful.”

It’s a smart strategy for retailers to advertise their upcoming holiday sales as much as possible: through in-store signs, yes, but mostly through their websites and social media presence. Those are the platforms customers are checking before they choose whether to visit a store, especially if they’re planning to spend more than they typically do on nonessential items.

“Show them great savings and deals to drive that trip,” Turner says.

2. Better yet, launch sales earlier than your competitors

Sure, you can get customers excited about your upcoming sales. You could also roll out those sales earlier than your competitors, and even before the holiday season unofficially kicks off with Black Friday (Nov. 25 this year).

“Don't be afraid if you're a retailer and a good operator to make those deals available earlier than you have in the past,” says Jason Baker, principal at Baker Katz, a Houston-based retail brokerage.

Even if you can’t roll out your landmark sales before the holiday season, consider offering smaller sales now to entice shoppers into your store. If they aren’t familiar with your brand, those sales could bring customers back to complete their holiday shopping with you in a couple of months.

“Retail’s an early-bird game,” Turner says. “The first place you see the deal and you decide to buy it — guess what? That's a product you’re not buying at another retailer.”

3. Have a top-notch website

If your store doesn’t already have a website, it’s too late to make that happen before this year’s holiday season, Baker says. If you have one, make sure it's at least fully operational, user-friendly and completely up to date on your current inventory and availability. It’s a good time to polish your social media presence as well.

Retailers can optimize their website for heavy holiday traffic by “clearly marking which merchandise is out of stock or unavailable and sharing delivery options upfront,” says Peter Messana, CEO of Searchspring, an e-commerce software company.

Of course, these improvements aren’t needed just for the holiday season. Roughly 17.2% of all retail sales happen online, excluding cars and restaurant purchases, according to CBRE. And around 80% of shoppers first search for a store’s website before visiting the brick-and-mortar storefront, according to a 2021 survey conducted by Visual Objects, a creative design directory.

The best retailers, Rizika says, are “not only engaging while they are open — they're engaging while they are closed.”

“Talk to the consumer and sell to the consumer while your doors are closed, through your ability to engage with them online, whether that’s with a great website or social media,” Rizika says.

4. Create an inviting place that’s more fun than online shopping

No longer is it enough for brick-and-mortar storefronts to showcase top-notch products and services. Today’s businesses need to make the store a destination that’s even better than the conveniences of online shopping.

“To use the store as a competitive advantage to me is something that the small business has to learn how to do,” Rizika says.

These improvements don’t have to be huge. If you’re in a temperate climate that allows year-round patio seating, consider setting up a couple of chairs or tables outside your store if that's permitted. Maximize your store’s natural lighting. Set up some pretty, place-making plants around the store. Heck, see if there’s room for a comfy couch or some stylish chairs at the front of the store.

The point is, think about small ways to activate the space.

“Owners thinking about their places as brands, and trying to connect their brand with the consumer, is something you're seeing great retailers have done for a long time, and more and more retailers are starting to recognize that trend,” Rizika says. “All these things that have become more and more important to us as consumers.”

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Ghost kitchen and restaurant tech company Kitchen United announced a Series C funding round that racked up $100 million, bringing the company’s total fundraising to approximately $175 million. The Series C funding will be put toward the company’s proprietary solutions stack and expansion plans for places like Miami and New York City.The Pasadena-based company’s roster of investors gained significant additions this round, with the inclusion of Alimentation Couche-Tard/Circle K, Kroger Co., Restaurant Brands International, B. Riley Venture Capital, Simon, Phillips Edison & Co., and the HAVI Group. Investments were also made by Kitchen United founders Harry Tsao and John Miller, Kitchen United chief executive Michael Montagano, and former NFL quarterback Peyton Manning.“This Series C financing further solidifies Kitchen United’s leadership position in the industry,” Montagano said in a statement. “Kitchen United uniquely sits at the intersection of technology, food, and real estate. Our solution serves as the technological and physical infrastructure revolutionizing centrally located distribution hubs through streamlining off-premises ordering and consumption.”The funding was announced in late July.

New locations

Kitchen United Chief Business Officer Atul Sood told the Business Journal in an email that the company plans to deploy its capital to establish new sites across grocery, traditional and food hall formats.“We aim to have 500 sites in the next five years and are diligently working towards several build-outs from Texas to Miami to NYC,” Sood wrote. “Further, we will be allocating dollars to enhance our proprietary technology stack which offers our customers the ability to order from multiple concepts in a single order.”Ghost or cloud kitchens are shared cooking spaces rented by restaurants that make deliveries only. They are often in secondary retail or industrial spaces. (Kitchen United’s Pasadena location is in a former cooking school.) Kitchen United provides those restaurant operators not only with kitchens but with staff, including line cooks and managers, and even a project manager to help launch a restaurant.The company also has a delivery and takeout service that lets customers shop for meals from multiple restaurants that all end up on the same bill. The company, which has about 200 operational kitchens across 20 regions, has marketed the service as Kitchen United Mix.“We believe this business stands apart from other industry players with its centralized locations, multi-format offerings, experienced management team, and mature technology stack — all of which align with Circle K’s mission to make our customers’ lives a little easier every day as we work together to shape the future of convenience,” said Kevin Lewis, chief marketing officer with Alimentation Couche-Tard.Kitchen United is part of an industry that rocketed in popularity in 2020 as restaurant operators launched ghost kitchens to bring convenience and safety to customers during the early days of the COVID-19 pandemic, a particularly uncertain time for public health. It also helped that ghost kitchens were and still are a way to establish a restaurant with little overhead costs. Establishing a location at Kitchen United costs $30,000 to get started, while traditional restaurants can cost hundreds of thousands of dollars to get up and running.The momentum behind Kitchen United and the ghost kitchen industry could be poised to continue, according to Rob Ury, Senior Vice President of Beta Agency, an El Segundo commercial real estate firm.“I think ghost kitchens had a peak when no one was allowed to leave their house, but it still remained quite strong,” Ury said. “I think people get used to certain habits, and convenience is definitely addictive. Plus, the economy has been strong enough up until recently that people have had enough disposable income to justify paying the extra few bucks to get the meal that they want delivered to their home.”Ury noted that the popularity of ghost kitchens has not caused operators to shift mass amounts of funds to establish such operations, but added that the industry’s impact has piqued an abundance of curiosity.He recalled a Los Angeles client with several traditional restaurant locations that tested how a ghost kitchen would work for its brand strictly from a delivery standpoint. “I think it turned out to be reasonably successful and has led them to more seriously consider opening a full-fledged restaurant in that trade area.”

Crowded field

Kitchen United is not alone in the bourgeoning ghost/virtual kitchen space and has a local competitor in CloudKitchens, which is based in L.A.Travis Kalanick, the former chief executive officer of Uber Technologies, secured a majority stake in City Storage Systems, the parent company of CloudKitchens, roughly four years ago.CloudKitchens raised about $850 million in November last year, according to Business Insider, which also reported that the company opens shell companies to avoid rental sites being linked with the parent company. The round valued the startup at $15 billion.“I think what we’ve seen is similar to the evolution of the ride-sharing industry and how there were just two companies that kind of emerged to kind of lead the pack with Lyft and Uber,” Ury said. “I think you’re seeing a similar trend with Cloud Kitchens and Kitchen United.”Another major player in the field is Beverly Hills-based C3, a ghost kitchen company launched in 2019. SBE’s Sam Nazarian, shopping mall operator Simon Property Group Inc. and hospitality brand Accor teamed up to launch C3. C3 turns dormant kitchens in malls and restaurants into shared cooking areas for its culinary brands.Despite the money flowing through ghost kitchen companies, Kitchen United and its contemporaries still must contend with challenges, according to Jeffrey Miller, associate professor and coordinator of Colorado State University’s Hospitality Management program.“I think nimbleness and awareness of market trends is going to be a big deal for them, and just like anything else, cash flow disguises a lot of problems,” Miller said. “So, if there’s any kind of difficulty in structural problems, rent’s too high, labor costs too high, that’ll be problematic.”Miller noted that inflation could also play a role in the success of Kitchen United. He added that customers are particularly sensitive to prices in restaurants.A report from the U.S. Department of Agriculture stated that food-price increases this year are expected to be above those recorded in 2020 and 2021. It also found that the price of food in grocery stores is predicted to increase by about 10.5% this year.Ury said it should be remembered that consumers go to restaurants and eat out for a multitude of reasons.“It’s clear that these ghost kitchens are never going to be even half of the restaurant landscape when you take into account how food is consumed by people,” he said. “People use restaurants for a wide variety of things.”

For more information, please contact Rob Ury.