Precursors to modern car wash date back to 1914, when people manually pushed motor vehicles through various stages of the wash cycle. Although the industry is more than a century old, investors have recently begun to recognize the major growth potential that the market offers.
Specifically, American investment interests have grown particularly fond of car wash properties that are provided to independent operators via net leases.
Check out these interesting statistics related to car wash investment
Throughout the entirety of the United States from March 2012 to March 2017, just two car washes leased to just one tenant in net form were sold to investors. However, from March 2017 to Dec. 2018 alone, a whopping 14 net-leased car wash businesses operated by a single tenant were sold around the country.
CoStar, which also researched and authenticated the two statistics above, estimates that the West Coast is home to some 30 car washes that are currently up for sale. Some three-quarters of these car washes are owned by just one tenant. These single-tenant car washes are different than their multi-unit-owning counterparts, such as major chains of car wash facilities.
These large chains of car washes often have solid credit ratings to uphold their leases.
Here’s what the future of the car wash investment industry looks like
Major operators of car washes have traditionally expanded in areas where land is readily available and cheap to purchase.
Operators of car washes on the United States’ West Coast aren’t very likely to hold their own against major car wash chains and the investment interests that drive their expansion.
As more investment money rolls into the car wash market across the United States, the nation’s largest car wash chains and other operators are likely to gobble up more land on the West Coast, despite the fact that it’s generally more expensive than elsewhere in the United States.
Why are car washes viewed as solid investments?
Just like laundromats, people will always be interested in washing and cleaning their cars, trucks, and other motor vehicles. Since car washes are generally pretty well-hedged against the bleak economic prospects of downturns and full-fledged recessions, they’re viewed as solid investment opportunities.
Express car washes are those that are automatically operated, meaning customers don’t have to get out of their cars or trucks and clean their rides themselves.
These car washes have been proven to perform well at major intersections that experience high levels of traffic. This is especially true for such intersections in major metropolitan areas.
Further, investors are able to subject the equipment used in express car wash facilities to accelerated depreciation under the Internal Revenue Code, helping them shelter their earnings from taxes in the current period, rather than deferring such savings more equally over several years in the future.
As Peter Allen famously put, “everything old is new again.”