Contradictory Trends in Parking for Commercial Real Estate
Parking’s not the most glamorous of subjects – but is absolutely vital to nearly every major commercial real estate development. In an era characterized by ride-sharing apps, remote workers, open-plan offices and slowly making its way into the market, driver-less cars – it’s also an increasingly complex one.
These economic and social patterns are pushing developers in unexpected directions. Some trends, like the growing proportion of millennials in the workforce, are actually having dueling and contradictory effects.
The office of today bears increasingly less resemblance to workplaces 20, 30 or 40 years ago. Take, for example, the (in) famous open-plan office. An increasing number of workers now commute to spaces devoid of offices, cubicles and sometimes even conference rooms, instead conducting their business in flexible, open spaces. As many developers and property owners have noticed, this has the effect of increasing the density of a given working space.
A recent post from NAIOP’s cited research, found that occupancy ratios of 5 or as many as 6 workers per 1,000 square feet are becoming increasingly common. Getting more workers into existing spaces is great for firms – until you realize that the total square footage of available parking remains the same. As a result, there’s a trend of developers shifting toward a higher ratio of parking spaces to square footage.
Over the last decade, according to the NAIOP survey, the most common parking ratio stood at a 4 spaces per 1,000 square feet. Conversely, the most common request, at 40 percent, is now for 5 spaces per 1,000 feet, and 23 percent of prospective tenants asked for 6 spaces per 1,000 square feet.
Another trend that’s popular in these same, more densely-packed offices is the movement toward full-or part-time remote workers. This creates a complicated dynamic whereby offices might need 125 percent of their available parking space on one week and just 75 percent the next.
Out in the real world, these two trends appear to be offsetting each other – for now. Indeed, members reported that while tenants are requesting additional spaces at an increasing rate, the actual daily usage in many cases remains low – at or below 3 spaces per 1,000 feet, on average.
Where space is at a premium, a lot of developers start to think the same thing – build up, not out. The trick is figuring out where to make that decision – and how much to invest. Mary Smith, senior VP and director of parking consulting for Walker Parking Consultants, told NAIOP that the “crossover point,” at which the cost of the land rises to the point that structured parking is more profitable than simple surface parking, is estimated at about $55 per square foot. The estimate assumes the cost of a structured parking at $15,000 per space, against $5,000 per space for an open lot. In Jackson, at The District at Eastover, you can see an example where there is a mixture of both surface and garage parking that are located in this mixed use development.
The development of certain other trends is heavily dependent on the economic and social geography of regions. Solutions to mitigate parking shortages or expenditures in sprawling Houston will necessarily look very different from those in denser, more vertical Chicago. Some companies have increasingly created incentives for employees to leave their cars at home – something which increasingly young, car-less millennials may embrace. But this only works where the urban and suburban infrastructure allows – indeed, more than a few workers now face the calculation of whether it’s more economically rational to keep or buy a car, or take a ride-sharing service like Uber to work every day. Recently in Jackson, we have seen a trend where Uber is making a big push in the market and has been aggressively advertising in different print, radio and digital advertising’s.
Regardless of what you think will happen in the future to commercial real estate, and the parking that serves it, we definitely know it is changing. Whether you lease Class A Office Space or own a Grocery Anchored Shopping Center, making sure you have a trusted commercial real estate advisor to help you navigate the ever evolving commercial real estate landscape is essential.
By Micah McCullough, CCIM
Vice President | NAI UCR Properties