Downtown Auto Group merges urban living with dealerships

As the first of five dealerships moves into a new $100-million urban complex, Toronto dealer Shahin Alizadeh says the project’s mixed-use model of condos and auto retail is well-suited to a post-pandemic world.

“Our plans actually ended up being exactly right for the circumstances where we find ourselves,” said Alizadeh, CEO of Downtown Auto Group (DAG). “People won’t be running around anymore and saying, ‘I think I’ll spend my Saturday going from dealer to dealer.’

“What we’re hoping to do is create a destination so that people, rather than sitting at a laptop, can actually go and look at a half-dozen different brands.”

The five-acre (two-hectare), five-tower project represents an opportunity to reach urban consumers on their home turf, as well as a new business model, aimed at generating cost-savings and multiple revenue streams at time when online technology is rapidly transforming automotive retail.

The total cost of the facility, designed by the architectural firm Streetcar Developments, is just under $100 million, almost 50 per cent less than it would have been to build five new stores, Alizadeh said.

Although DAG broke ground in 2015, completion endured an 18-month delay, in part because of the pandemic, he said. Still, costs remained manageable by obtaining lower mortgage interest rates and selling some of the land being vacated by dealerships moving into the complex.

DAG owns the property and will be the sole owner and operator of the five dealerships. The group partnered with Toronto developers Streetcar Developments and Dream in 2014 to design and build the residential and non-automotive retail component, giving DAG partial ownership of the non-automotive businesses.

This development is bringing new aspects and profit centres into the business, said Alizadeh.

TRENDY NEIGHBOURHOOD

As well as Toyota, the Autoplex will house Ford-Lincoln, HyundaiGenesis, Nissan-Infiniti and Chrysler-Dodge-Jeep-Ram stores.

In mid-October, Downtown Toyota was the first of five storefronts to move into the building at Don Valley Parkway and Eastern Avenue, a high visibility intersection in Riverside, one of Toronto’s trendiest neighbourhoods. The four other storefronts will move by the spring of 2021, and nearly 900 condominium units — many of which are already occupied — have been integrated into the towers above.

Of the five new dealerships, each of which houses four floors of showroom, two are fully visible from the Don Valley Parkway. The three other positions are set farther back from the highway but are visible fully from Eastern Avenue and partially to northbound highway traffic.

‘CHANGING LANDSCAPE’

Compromise on exterior image elements was required from each brand to satisfy the city’s planners, who required that the buildings have a consistent exterior design.

“I think [the brands were] realistic,” Alizadeh said of their willingness to adjust their image requirements. “They know that this is a changing landscape.”

Brynn Winegard, a Toronto marketing expert, said locating dealerships in walkable city neighbourhoods is key to reaching young, urban buyers, who are less likely than previous generations to move to the suburbs after starting families.

However, Louis-Yves Cloutier, president of automotive e-commerce provider 360 Agency, said the physical location of a dealership isn’t as critical as effective digital sales tools. Younger buyers, he said, care more about a seamless transition from digital to dealership, and they will travel to visit a dealer that meets their expectations.

“Even though you have a dealer downstairs, they will start their transaction online,” Cloutier said.

SHARED FUNCTIONS

While customers will be met by separate dealership and service entrances for each brand, the complex’s integrated design creates efficiency by sharing many functions across the entire group, Alizadeh said.

For example, administrative operations are centralized for the five dealerships, including management, human resources, finance and marketing. Some positions, such as vehicle delivery, will also be shared, Alizadeh said.

Employees “don’t sit around because they’ve dealt with new-car deliveries,” he said. “They go to the next brand. ... Those are the kinds of synergies  that we hope to be able to capitalize on financially.”

In its service operations, three underground levels house 59 hoists across four service areas, all of which are set up to receive fluids from four centralized tanks with a total volume of 64,000 litres. Parts for seven of the 11 brands are stored in an automated unit, which allows technicians to retrieve components by code number — a feature that forgoes the need for 8,300 square feet (770 square metres) of floor space.

Six hundred underground parking spaces will be reserved for customer service vehicles and deliveries, and will be reallocated daily to meet the anticipated delivery and service needs for each brand. Off-site compounds, located within one kilometre of the Autoplex, will be used for new inventory and staff parking.

A centralized detailing centre with an automated power-washing station can clean up to 90 cars per hour. In the long term, Alizadeh hopes to integrate an information centre where customers can inquire generally about their vehicle class of interest and be directed to multiple stores within the complex.

“Those are the types of things that, in my opinion, have never been offered in our industry,” Alizadeh said. “I think for us to wedge one dealer against the other in the hopes of selling more cars is something that went out 20 years ago. ... I’m hoping that we can convey a different message to the consumer, that we’re going to have some unique approaches to selling.”