NYC's Car Explosion Has Caused A Pricing Surge At Its Garages
Over the past nine months, as car ownership in New York City has spiked, soaring demand for parking in the country’s most walkable city has packed garages to the brim, driving a huge surge in pricing across the five boroughs.
Many of the players who own and operate these garages expect the shift to stick around and are planning accordingly.
“A percentage of the population that was forced to drive … a percentage of that is probably not going to go back, they’re just going to get used to driving, and that necessitates parking,” said John Petras, co-founder and managing partner of RockFarmer Properties, which owns 1,200 residential units and 1,000 parking spots across the city. “That’s a structural shift.”
The coronavirus pandemic prompted a car-buying frenzy around the country as people avoided public transportation. One EY survey found that at the end of 2020, 31% of the non-car-owning population said they planned to own a car in the near future, TechCrunch reported.
As workers and residents left the city last year amid the worst of the pandemic, parking garages, like many retailers, were hit hard. Some operators said they saw less than half their normal business last summer. During that period, many cut their prices, garage owners told Bisnow.
Despite the surge in activity over the past nine months, some operators have been accused of failing to pay rent — several landlords have sued Icon Parking for not paying any rent since the pandemic began. Some landlords have even pushed those not paying rent out and signed leases with new operators instead, brokers say.
But the parking bust soon turned into a boom as New York residents who flocked to the suburbs and the Hamptons to escape the worst of the pandemic came back with cars. Between August and October 2020, car ownership rates across the city jumped nearly 40%, and for many, this is a new way to get around.
Parking garages owners and developers who believe the trend will stick around for the foreseeable future are adjusting their plans accordingly, but others believe it is just a blip and worry that the city’s environmental and affordability goals will be thwarted if the rise in car use and parking continues.
“You’re never going to solve [housing affordability and climate issues] if you don’t decrease car usage,” Slate Property Group principal David Schwartz said. “The cost on affordable housing, the cost on the climate, those things are so drastic that you have to do everything you can.”
Demand for parking across RockFarmer Properties has been unprecedented, Petras said. It has sold spots for $100K for the first time, and raised rental prices between 10% and 25% compared to September 2019, depending on the location. At The Rowan — RockFarmer’s 46-unit condo development in Astoria, Queens — 20% of prospective buyers said they wouldn't consider buying a property without on-site parking, he said.
Most of the uptick is concentrated around residential areas, said Jeff Sanders, regional vice president for LAZ Parking, which has over 200 locations around the city, including the Port Authority Bus Terminal parking garage near Times Square and one in a heavily residential neighborhood in Battery Park.
“I think you're seeing a very large pickup in monthly parking due to just car ownership rates going up in general,” Sanders said.
While monthly rentals in residential areas are up, they are down in office districts, as those who would get a monthly rate to go into the office five days of the week are now opting to pay on a daily basis.
“We’re still getting that parker on the daily side, just not on the monthly side,” Sanders said.
ProPark Mobility, which owns about 130 garages in and around New York City, has seen an uptick of around 10% in monthly rental customers compared to September 2019 and an uptick of around 20% in daily customers compared to this time two years ago, said Executive Vice President Kristen Sokich, who helms the New York and New Jersey region for ProPark.
Sokich said ProPark is thinking strategically about the new pandemic-induced cultural dynamics by expanding in areas where demand is high, and possibly pulling back where it’s not, such as commuter lots in suburban locations. Recently, ProPark took over a garage owned by Columbia University as part of that strategy, he said.
This is one of many garages to change hands recently. As the parking garage market began to stabilize early this year, landlords and tenants have been increasingly signing new leases, said Newmark Vice Chairman Brian Ezratty, who has brokered over 160 garage deals over the past 30 years.
“Deal flow now is actually pretty busy because there have been a lot of locations where landlords are taking back garages because the operators haven't been able to pay the rent or don't want to pay the rent,” he said.
While many are preparing to cash in on the trend, not everyone in real estate thinks the boom will last; creating more parking goes against crucial sustainability and affordability goals.
“Nationwide, with zoning, they are realizing that if we see the two biggest issues that we have are housing affordability and climate change, eliminating parking helps with both of those, so I don’t see how it doesn’t happen,” said Schwartz, whose Slate Property Group owns about 3,000 units around the city.
Buildings with on-site parking charge about 17% more rent per unit, despite the parking only catering to a portion of renters, according to an Urban Land Institute report. On-site parking also pushes affordable housing development farther away from urban cores — surface parking is cheaper than structured garages — propelling further inequality in cities, ULI’s research shows.
“I think quite frankly, it remains to be seen how long-lasting this increase in demand for private car ownership is,” ULI Building Healthy Places Director Matt Norris said. “Developers are taking stock of the trends and the reaction to the pandemic, there’s a sentiment that the trend that predated the pandemic, a decrease in demand for parking, is likely to continue in the long run.”
Schwartz said that, while ultra-luxury developments will likely lean more into on-site parking, he is certain the boom will fizzle out, and quickly. As the city grows its public bike infrastructure and residents feel more safe to get back on the subway, the surge will prove to be a blip, he said.
“In general, car ownership is gonna go down, parking is gonna go down,” Schwartz said. “It’s crucial … We can’t grow and add so much population and rely on cars, because that’s the whole point of being in New York.”
Across the country, there are 2 billion parking spots and about 250 million cars, according to Norris. While ULI doesn’t have New York City-specific data, transit data analysis expert Jehiah Czebotar, who advocates for less parking, estimates there are 5.4 million parking spots across the five boroughs. There were about 1.32 million cars registered in New York City as of last month, art and culture news outlet Untapped New York reports.
“Even with an increase in car ownership or driving, I think the real important thing is to be more efficient in allocating the parking spaces that we already have,” Norris said.