REAL ESTATE NEWS

The car wash sector in California is continuing to thrive thanks to increased demand.

With favorable lease structures, longer lease terms, growing store counts and improving credit, demand is present in the marketplace, Matthew Mousavi, senior managing principal & co-head of national net lease at SRS Capital Markets, told GlobeSt.com.

Brands such as Quick Quack, Mister, and others are expanding throughout the state in both infill and growth markets.

Additionally, new tax legislation passed in July (the One Big Beautiful Bill Act) offers substantial tax advantages for real estate investors, including 100% bonus depreciation for qualifying assets, such as car wash equipment, Mousavi said.

“This tax incentive has been a significant boost for the car wash sector, particularly in high-tax states like California,” he explained.

“We are seeing increased demand from individual investors, partnerships, family offices, and mid-to-large funds for car wash properties, a trend that is expected to continue. With varying credit profiles and multiple brands expanding, a healthy amount of this product is also available on the market. This sector should continue to be an attractive segment within the marketplace.”

SURMOUNT is an industry-leading full-service CRE platform that provides net-lease focused real estate solutions to investors and has closed more than $4 billion in car wash sales nationwide.

“The most valuable car wash markets in California are the infill locations in Los Angeles, San Francisco, and San Diego,” its CEO and founder, Glen Kunofsky, told GlobeSt.com.

However, he added, “These are the most challenging places to develop new tunnel car washes due to land assembly, permitting restrictions, and lengthy approval timelines."

“That makes existing real estate in those markets especially valuable. With the rise of express tunnel formats and the membership model, sites that can be converted from full-service operations into express tunnels are in particularly high demand.”

Because many car wash sites have high barriers to entry, existing sites are especially valuable, according to Kunofsky.

“The underlying businesses are also attractive, with strong cash flow relative to rent,” he said. “On top of that, the ability for new owners to take advantage of bonus depreciation makes these assets even more compelling.”

Kunofsky said that car wash real estate valuations are rising, particularly for net-lease car wash assets that appeal to passive investors.

KWP Real Estate this week announced the sale of 2537 Lincoln Blvd, a 0.44-acre car parcel in Santa Monica, Calif., for about $6.66 million. The site was previously home to a local nursery, Rolling Greens, and before that served as a car wash and auto repair shop.

Lee Shapiro, executive vice president, director of brokerage for KWP in Los Angeles, told GlobeSt.com that car wash sites are particularly attractive to investors and owner-users as these locations are often positioned on high-visibility, high-traffic corridors and typically consist of larger parcels of land, which are appealing for redevelopment or conversion to other automotive-related uses.

“In a market like California, where larger parcels of land in commuter corridors are scarce, zoning flexibility is highly valued, and demand for well-located infill sites is strong. These parcels carry significant upside potential,” Shapiro said.

“This is especially relevant with the growth and expansion of the EV-charging companies throughout California.”

Source: GlobeSt/ALM