Ken Veltri recently found $1 million, just sitting in the parking garage of one of his apartment buildings. As head of asset management for AMLI Residential, Veltri’s job is to maximize the value of the firm’s 75 properties in nine U.S. markets. So when AMLI’s 293-unit South Lake Union property in Seattle consistently reported a surplus of about 20 unused parking spaces, he sought a way to monetize those vacancies.
Teaming up with Whereipark, one of a handful of apps that do for parking spots what Airbnb does for vacation homes, Veltri started marketing his empty spaces. To his surprise, he was able to lease out his first 20, and then add three more, within about 30 days, mostly to workers from nearby offices. Charging $225 per month for each spot, he realized ancillary income at the property of $62,100 per year.
“I was shocked,” Veltri says. “We added over $1 million in value to the property in 30 days. We’re going through the logistics right now to roll it out at six additional properties in the next month or so. That’s another $6 million we can add to our platform, this year.”
A Common Occurrence
As amazing as Veltri’s sum total of $7 million in found valuation is, what made it possible isn’t that uncommon. Driving habits have changed. Millennials are applying for fewer driver’s licenses than past generations, and they own fewer cars. They favor ride sharing apps such as Uber and Lyft, and with the advent of driverless cars on the horizon, the trend is expected to grow. Given all those reasons, many apartment operators say they’re seeing less demand for—and use of—parking spaces at their properties today.
While that’s not necessarily the case in all markets, it’s prevalent enough that it’s changing the way multifamily pros design and think about parking. While some are trying to monetize the surplus parking they’ve already built, others are looking at how to build less parking today, or construct new garages in ways that can be adapted to other uses in the future, such as mini-storage, office space, or even more apartment space. And in some cases, they’re forgoing parking in new construction almost completely.
Take The Stage, a 90-unit condo being developed by Encore Capital Management at 1075 Market St. in San Francisco, a locale that’s been on a mission to promote sustainable transportation by capping parking ratios during its current population boom. Art Falcone, Encore’s CEO, says the project will have a ratio of just 0.2 parking spots per unit, far below the 1-to-1 and even 2-to-1 ratios that have historically been mandated in many municipalities across the country. Because a parking garage would have cost an additional $50,000 per unit to build, Falcone says he’ll be able to price the units more competitively when he goes to market in early 2018.
“Our clients on Market Street in San Francisco aren’t interested in garage spaces,” Falcone says. “So, we’re not burdening them with a garage they don’t want. Instead, we’re putting in other amenities they do want, and we adjusted the price down accordingly.” He says units will come in $50,000 below where they would have had he built a garage.
At The Rise, an apartment project Encore’s building with partners on the other side of Market Street, Falcone says he’ll be able to price his rents $300 lower, on average, due to a similarly low parking ratio.
Buildings Versus Pavement
As the move toward reurbanization has spread in recent years, and a community’s Walk Score has become just as much of an amenity for residents as anything developers can put inside a building, cities have started to recognize the decreased use of cars and, hence, the need for less parking.
“It started to change about five years ago, when the more-progressive cities started embracing lower parking ratios in their planning,” says Dan Doyle, senior vice president of development at Charleston, S.C.–based Beach Co., which owns apartments throughout the Southeast. He points to Chattanooga, Tenn., and Greenville, S.C., as two cities in his region as examples. “They want investment in their community, great architecture, and great buildings, instead of parking spaces.”
Cities have also recognized the cost that high parking ratios can saddle on a project. Developers say parking’s price tag ranges from $15,000 all the way to $90,000 per space for structured parking, with $35,000 a ballpark average.
“Structured parking, depending on the complexity, type of construction, and market, can get very expensive, very quickly,” Doyle says. “Every parking space you have to provide takes away from what else you can do with the rest of the building. So cities aren’t getting caught up anymore in forcing you to have two spaces for every residential unit.”
8 Spots for Every Car
That new stance by municipalities has been driven, at least partially, by the results of the feasibility studies developers must undertake when they propose their projects. “The traffic consultants are coming back with data that show reduced demand,” says Jeff Michael, COO at Chicago-based Horizon Realty Group, which owns 25 communities and 2,000 units. “Cities are listening to the data they’re seeing.”
And yet, while those studies show less demand today, the legacy of high parking ratios from the past is showing up now in parking lots across the country. There are three to eight parking spaces already built for every vehicle in the U.S., according to a 2011 report from the University of California. That means America’s historic love affair with the auto has resulted in some markets having plenty of spots for cars, but not enough housing for the people who actually drive them.
The Center for Neighborhood Technology studied parking use at residential communities in Seattle; San Francisco; Washington, D.C.; and Chicago by visiting parking lots between midnight and 4 a.m. Sunday through Thursday, when most residents would be at home. What the group found, though, was that, across all four cities, one-third of the parking spots at apartments and condos weren’t being used during those times.
The surplus of parking spaces was so glaringly obvious to Vivek Mehra, he founded a company to address the problem. As a resident of Chicago, he noticed how hard it was for friends to find parking when they visited his condo, even though spaces in the building’s garage sat empty. So he launched ParqEx, an app that helps anyone with a parking space lease out free time to others.
“For the last 50 years, for every residential unit that’s been built, developers have been required by zoning laws to build about one and a half or two parking spaces,” Mehra says. “So the problem isn’t that there’s not enough parking to meet the demand. Instead, we need to shift how we look at the supply that already exists, and how we can put these underutilized assets to good use.”
ParqEx helps carless residents effectively cut their own rent by leasing out any community-provided parking spots they don’t need.
For Horizon Realty’s Michael, partnering with ParqEx resulted in what he calls “found income.” The firm’s 161-unit Sheridan Plaza on Chicago’s North Side, which was built with a sub–1-to-1 parking ratio, still had unused parking spaces. By listing them with ParqEx, he’s rented them out to generate additional income of $20,000 a year.
Developers aren’t just looking at how they can monetize surplus parking today. At Encore, Falcone says he’s trying to plan for alternative uses for both his existing and future parking structures, such as mini-storage, so he can continue to monetize them over time.
“We’re in 11 different cities, and, in most, we’re doing less parking,” Falcone says. “But where we’re unable to convince the city or county that you need less parking today, we’re engineering these garages so we can do something different with them later.”
Amy Korte, principal at Boston-based architecture firm Arrowstreet, says, increasingly, that’s a request she gets from clients. “We’re really questioning how we can adapt [parking space] in the future to an alternative use,” she says.
That might mean changing head heights and floor slopes so they can be converted into apartments in the future, or building chases and other easily accessible infrastructure into the building. “With co-work spaces and business incubators becoming prevalent, a lot of these structures could be a good fit for that in the future too,” Korte adds.
In fact, in Boston, there’s already a parking garage developers are fighting over, with the hope of converting it to other uses. “Think about it as creative destruction,” says Stephen Davis, vice president, development, at Boston-based Davis Cos., which has acquired or developed 7,000 apartments in the Eastern U.S. “We’re getting rid of excess parking, taking out some levels, and then using it as a building podium. I think that’s an interesting snapshot of the change in the urban setting, and vehicle use in general.”
Not all markets claim a surplus of parking, of course. In Los Angeles, for instance, a property manager who was initially open to an interview for this article declined when she learned its specific focus. “Nobody walks in L.A.,” she says. And in Austin, Texas, Courtney Gaines, president of CLEAR Property Management, says cars are still king. “Everything in Texas is spread out, so everyone still drives,” Gaines says. “At our communities, we always have more demand for parking. If the complaints aren’t about not enough spaces, it’s about not having enough spaces closer to the front door.”
In Fort Worth, Carl Malcolm, vice president at Dallas-based JHP Architecture / Urban Design, reports that a client recently built more parking than required by zoning in order to profit from a lack of parking at nearby retail shops. And while parking ratios have been declining in municipalities in his area, too, some are starting to rethink that philosophy as cars, and people, vie for more space.
“Our clients tend to be incorporating more than the city’s requirement to meet the market demand,” Malcolm says. “In fact, parking is such a driver that it really is one of the first things to look at when starting a new design—how much and what type of parking do you need?
“Cities that have lowered parking requirements are now looking at bringing them back up. In Fort Worth, they’re trying to quantify the problem and figure out whether they need 5% or 10% more parking now.”
Whatever the parking situation in your market, one thing you can be sure of is it will change, just as the current generation of residents has changed what it means to own a car in America. “For previous generations, the car was a symbol of their personality, provided a sense of freedom, and was another indicator of having ‘made it,’ ” says David Senden, principal at Irvine, Calif.–based KTGY Architecture + Planning. “Renters today look at all that goes into auto dependency and have a great desire to be rid of the car.”