Earlier this year we published an article citing a study showing that parking garages are rarely economic unless the land value is from $34.44 to $57.39 per square foot or higher. While we don’t usually like to cover the same topic twice in such short order, we just found a superb study that estimates rent requirements to profitably build multi-level or underground parking structures.
Kidder Mathews completed an analysis is 2014 based on Seattle area construction costs using Marshall & Swift Valuation Service data.They used operating cost data based upon parking facilities in apartment buildings with input from Kidder Mathews Property management and Apartment Investment Brokers. The results of the analysis are as follows:
PARKING REVENUE REQUIRED TO SUPPORT PARKING
|Key Kidder Mathews Inputs and Results|
|Type of Facility||Land Cost Per SF||Construction Cost Per Space||Annual O&M Costs||Annual Reserves||KM Breakeven Monthly Revenue||KM Monthly Revenue for Expected Profit*|
|Suburban, 2-Level Structure||$13||$24,650||$500||$548||$220||$242|
|Urban, 3-Level Structure||$60||$24,650||$582||$548||$250||$275|
|* Assumes 10% annual return on investment. **Based on 6 story structure, with 2 floors of below grade parking.|
While this study covers apartment garage expenses, it provides a strong basis for garage expenses for multiple property types.We may infer that if a suburban office building cannot generate $242 per month in extra rent for parking structures, then the structure is an economic drag instead of a benefit (even if it is necessary to provide minimum parking needs).
I live in Evanston, where we have seen multiple high-rise apartment building proposals, but no developer ever wants to provide as much parking as required by code. It is easy to understand why, when an Urban, 3-level structure (where land is $60 per square foot) requires $275 per month rent to justify the space.That is pretty high and is difficult to achieve.
In our last article on Parking Garages we indicated that often such structures should not be considered an amenity, but as a drag on income as far as the owner is concerned. The data from this study provide an easy to understand basis for obsolescence as opposed to an amenity value for parking garages.