Construction's the cakewalk. It's getting to that point that's the headache.
Lamb's Tire & Automotive Centers in Austin wants to open five new retail stores by this time next year, but rapidly rising real estate prices have put substantial obstacles in the way. John Lamb Sr., president and CEO of the 15-outlet dealership, said actually building a new store can take a breezy four months compared with the year or more needed to find, negotiate and close on the land.
After trying his and his broker's patience for that long, the sale prices don't help ease the pain, Mr. Lamb said. Property in Texas that sold a year or two ago for $350,000 now fetches around $800,000. ``That's driven the dynamics into a different world,'' he said. ``It still works, but you just have to generate more and expect more out of the operation.''
In 2004 Lamb's Tire posted sales of $24.8 million and anticipates sales of $31.2 million this year. The Goodyear dealership is all retail, with 25 percent of its revenue from tires and the rest from automotive service. It added two stores last year.
Lamb's Tire is closing on two parcels and hopes to open stores on those by early spring at the latest. The company still is scouting for three more locations in the Austin area.
The dealership is looking for high-growth and high-income areas, which Mr. Lamb admitted are the higher-cost parts of town. He also is formulating a new exterior design to make the stores more eye-catching. They've traditionally followed the Goodyear prototype of a rectangular building with five bays on either side of the breezeway, but he wants to experiment more with T-shaped buildings, likely with 12 service bays.
``I'd like something with maybe a fancier storefront,'' he added.
The interior of his stores have largely kept up-to-date, though. They include the usual amenities plus wireless Internet and computer workstations for customers to do work, check e-mail or just surf the Web while they wait. It's extremely popular in the metropolitan market, Mr. Lamb said.
As prices soar in the Austin market, Lamb's Tire has some advantage with its size. Austin continues to grow out into the suburbs, giving the dealership plenty of opportunities to grow within the metropolitan market.
``It's just growing out, which makes it great for me because I can maintain my economies of scale in terms of branding and marketing and advertising,'' he said. ``I don't have to re-invent the wheel in a new market.''
While he can't wait for real estate prices to come to their senses to enlarge his business, Mr. Lamb is confident that the real estate market is a bubble that eventually will lose some air but not crash completely.
``It's never going to break,'' he said. ``I think it's going to slow down. It's got to reach a cap at some point.''
The market's so hot because out-of-state folks, especially from California, are selling their houses in their former market for much more than houses cost in Austin, so they're driving the prices up. Foreign investors also are driving up costs, Mr. Lamb contends.
This situation, however, makes it very difficult for newcomers into the Austin business market, he said, though smaller tire dealers who are sitting tight in their owned buildings probably are doing fine.
He said another difficulty in the market has been aggressive tactics from some car dealerships trying to boost their tire and service business. He said he's unhappy with what he calls mud slinging, but he hasn't seen an impact to his business yet from car dealers.
``There's always something. That's just something right now. There'll always be something else later.''
One surprise in the heavy commuter area has been a general resiliency to recent spikes in gas prices.
``I thought this would have a huge effect because they have to drive a good distance every day back and forth to work,'' he said. ``At least I figured there'd be more people car sharing. I haven't seen any of it. It's amazing, it's quite resilient. That's one of those happy surprises.''