Shrinking Supply, Increasing Demand: One Asset Class Could Bring Value To All Others
When Gregg Reuben was a 19-year-old UCLA student, he set up a side gig for himself: running a market for individuals to exhibit and sell their used cars on the weekends. With an empty lot on his hands during the week, Reuben decided to use the space as a private parking spot.
Those experiences taught Reuben the basics of the business of parking. Now, 30 years later, Reuben is CEO of his own company, Centerpark, a real estate investment firm specialized in urban parking acquisitions and management.
“I think parking is going to become a valuable amenity for any project, whether it's office or residential, just because there's so little of it,” Reuben told Bisnow. “The supply is shrinking, while the demand is increasing.”
New Yorkers have bought tens of thousands of cars since the start of the pandemic, but are now trying to figure out how and where to park between increasing costs in private garages and ever scarcer street parking spots. Whether new pressure on parking is enough to turn it into an amenity for developers is yet to be determined — but in the meantime, private garages are likely to continue increasing prices.
By 2023, New York's CBD will have as many as 85,000 more cars on its roads than before the pandemic, according to research published last year by Clarion Research and Sam Schwartz Engineering, a transportation firm run by former NYC Traffic Commissioner Sam Schwartz.
But Reuben says there are now just 1,050 parking garages in the borough — a 14.3% decrease since 2015. Meanwhile, the number of registered vehicles in Manhattan has increased 28.5% since the start of the pandemic, according to Centerpark’s data.
Some additional dynamics are adding extra pressure to New Yorkers looking for a parking spot: Centerpark estimates approximately 10,000 parking spaces were lost to outdoor dining in 2020. Several thousand more disappeared as NYC expanded bus and bike lanes in the years prior to the pandemic, and tens of thousands may disappear as that expansion continues, Centerpark claims. Alternate side parking, which returned to NYC earlier this month, is also creating additional headaches.
“Municipalities as a whole are beginning to realize the value of curb space, and that it's not best served for parking,” Reuben said.
Reuben said the low availability of parking, together with more New Yorkers looking for spots, is pushing prices up — a trend that was already gathering steam a year ago.
The average cost of monthly parking in Manhattan was $547.50 in 2012, according to Centerpark’s data. By 2022, the average price was almost 39% higher at $760.80. The increase was even more marked in hourly parking, which shot up 75% over the decade — from $19.50 per hour in 2012 to $34.16 this year.
The short supply of parking in NYC is, in part, a reaction to policy changes over the past decade. Parking minimums — a requirement for new residential developments to include parking — led to a glut of parking supply by 2012, according to a study by the NYU Furman Center published that year. Community boards can — and have, according to NYC Streetsblog — pushed to grant developers waivers to parking minimums in recent years, and this spring a bill abolishing parking minimums passed the state House and Senate.
The value of parking could translate across asset classes, according to Daniel Lebor, a partner at Brooklyn-focused brokerage and advisory firm TerraCRG. Offices and residential buildings are both providing more parking to tenants as a perk, he said, although prices have increased. But despite that trend, Lebor said he doesn’t see parking becoming a key amenity in NYC.
“Not too long ago, those spots weren’t necessarily getting filled, and they were more of a liability than a benefit. Now, I just don’t think [developers] worry as much because they think they’ll fill the space up,” he said. “It's not that parking is adding so much value on the building, it's that it's not as detracting as much.”
One area where Lebor believes price increases will remain high for parking in NYC is industrial. The pandemic saw an explosion of last-mile fulfillment centers. With the warehouses comes the need for spaces to park extensive vehicle fleets.
“We saw the rates rise for just straight industrial parking from $9, $10 a foot almost to $17 or $19 a foot in the boroughs,” he said. “That’s why industrial land went from being $200 a foot to $350 a foot — when it’s supported by land, it makes the industrial use significantly more efficient because it's so hard to park.”
Nonetheless, Reuben and Centerpark believe New Yorkers who have acquired cars during the pandemic are unlikely to let them go easily. Centerpark’s reaction to the increased volume of vehicle activity in NYC has been to search for its next acquisitions.
Last month, the company purchased two parking condominiums attached to residential buildings near Midtown from Muss Development, one at 58 West 58th St. and the other at 222 East 58th St. Both are currently operated by Icon Parking, but Centerpark plans to take over operations on one contract when it ends next year.
The acquisitions aren’t large spaces, Reuben said, but offer significant potential based on location. On average, Centerpark says parking garages in Manhattan generate $45 per SF in revenue, which goes down to $25 of operating income after expenses.
“58 West 58th St., within a one-block area that we see as the addressable market, there’s almost 3.8M SF of mixed-use space between office, residential, hotels,” Reuben said. “The parking market is still underserved substantially.”
The number of people back in the office full time has been hovering at around 40% for the past few months, according to data from Kastle Systems. But the share of people using a car for their commute has increased, according to Reuben: Approximately 15% of journeys into Manhattan prior to the pandemic were by car. Vehicles now account for 35% of trips into the borough, he said.
“You don't need a large percentage of people to commute into the city by car in order to utilize the existing inventory of parking spaces because there's such a disparity between the demand and the supply,” Reuben said.
But TerraCRG’s Lebor told Bisnow parking isn’t necessarily influencing deals across most asset classes. Between wait lists for car purchases, the cost of gasoline and NYC’s abundance of public transit, Lebor is uncertain parking will continue to see this much demand as an amenity across asset classes.
“It's never like I'm selling a building being like, ‘Oh, they only have 19 parking spots,’” he said. “I think it adds value in the sense that it is an amenity, but it's not necessarily like a profit center."