Why are investments in parking lots becoming increasingly profitable?

Parking space records in Manhattan

In the autumn months of 2014, an unusual case was recorded: ten parking spaces were offered for sale in one of the most elite residential complexes in Manhattan, each valued at 1 million dollars. This fact became a significant event in the real estate sector and set a record for parking space prices.

Parking deals in other cities around the world

But this is far from the only case where parking costs reached astronomical heights. For example, in London in February 2014, a deal was made for the purchase of a parking space that could accommodate two cars. Its price was £400,000, which is astonishing considering that this amount is two and a half times higher than the average cost of housing in Britain.

In 2012, a parking space was sold in Hong Kong for $640,000, highlighting the luxurious nature of this market segment. New York also has numerous examples of high prices for parking spots. For instance, at the GM Building, renting a parking space will cost over $300,000 a year. In Boston, a deal took place in the summer of 2013, where two parking spaces in a residential building were sold for $560,000.

Features of the parking space market

The high prices for parking spaces in the largest cities in the world are due to their high demand, making them an attractive investment opportunity. There are several factors that explain this trend:

• Resilience to economic changes:The parking market turns out to be resilient to changes in the economic situation. Even in challenging economic times, the number of cars on the streets remains at a level that creates stable interest in parking spaces.
• Low operating costs:Unlike residential properties, which require regular repairs every 4-5 years, maintaining parking lots requires significantly less investment.
• Minimum maintenance costs:Moreover, the maintenance costs for parking spaces are minimal, especially in the case of multi-level and automated parking facilities.
• High investment returns:As a result, the cost of operating parking lots can be lower than that of residential properties. At the same time, the income from investments in parking spaces can be twice as high as the rent for residential space.
• Minimal risk of vacant seats:Thanks to the high turnover rate of tenants, the risk of vacant spaces is minimized, making investments in parking lots safer compared to other forms of commercial real estate.

The problem of non-payers

Another important aspect is the issue of non-payers. It is easier to terminate contracts with them than to evict tenants from residential properties, as the law in Europe protects their rights, and the eviction process can be prolonged for a long time.

Choosing the right parking spot

Now let's talk about how to choose the right parking for your needs. There are two key types of parking facilities:

• The first type –ground parkingThese can be both open and covered areas.
• The second type –multilevel structuresThey can be both underground and above ground.

Type one parking lots are often less reliable, especially in business centers, as new construction projects may arise in their place. Multi-level parking lots, on the other hand, tend to have a longer lifespan and remain profitable.

Investment attractiveness of parking lots

It is important to note that parking spaces can be either publicly owned or privately held. Government properties are sometimes leased to private companies while still being accounted for by state authorities. This is what makes investments in parking lots increasingly relevant and promising for investors looking to diversify their assets and increase their capital. Investments in parking spaces are becoming an important part of strategic asset management in the context of the modern global market.

Parking spaces in megacities

In modern megacities, the availability of parking spaces is extremely important for people visiting business centers, shopping complexes, and entertainment venues. These spaces are also located near office buildings, residential complexes, medical institutions, as well as at park-and-ride facilities near major transport routes.

The dependence of income on location

The economic efficiency of parking lots located near airports significantly depends on the current macroeconomic situation. At the same time, parking facilities near hospitals tend to generate more stable profits. Investments in parking spaces in city centers are considered particularly profitable, as they are close to key business and shopping districts, as well as entertainment venues such as sports arenas, concert halls, and airports.

Purchase of parking spaces with housing

In addition, there is the option to purchase parking spaces in the underground parking lots of apartment complexes when buying a home. However, it is worth noting that apartments with one or two bedrooms are not as closely associated with the availability of parking spaces. In contrast, for properties with three or more bedrooms, this offer is much more common.

If the parking is located inside a building, the most popular spots are on the first floors, situated near the elevators and staircases.

Investment strategies

If an investor wants to increase their wealth, it's better to consider acquiring several parking spaces or even an entire parking lot in a complex. It's also important to understand that parking areas can become a significant element of a diverse investment portfolio, which can include various types of commercial real estate.

The need for parking and its economic efficiency

To maximize profits from investment ventures, it makes sense to focus on markets with a high demand for parking. The specifics of this demand are determined by various factors, such as:

• demographic situation
• concentration of retail outlets
• purchasing power of citizens

Research conducted by Bouwfonds REIM has shown that the most profitable areas in Europe are located along the so-called "golden curve," which encompasses cities from Liverpool to Valencia, including London, its suburbs, the Randstad region in the Netherlands, the Flemish diamond, as well as key metropolises such as Zurich, Milan, and Barcelona. Paris is also a significant market for investment.

Market analysis in the USA

In the USA, attractive investment opportunities in parking spaces can be found in major cities like Boston, Washington, Los Angeles, New York, San Francisco, and Chicago, as well as in smaller towns in the Silicon Valley region.

The cost of parking in different cities

According to a study by Colliers International, parking costs in London rank among the highest in the world. The average rent for a parking space in the center of the British capital is $1,084 per month.

Rental of parking spaces in megacities

In modern megacities, the rental prices for land plots and parking spaces are experiencing significant growth, which is linked to the constant reduction in their available areas. Parking fees are increasing every year at a rate that outpaces inflation. According to research by Q-Park, in the early 2000s, the cost of renting parking lots in European countries rose by an average of 5% per year.

The rise in parking prices in Europe

Research on price growth across different countries shows the following data:

• Belgium- 5.5%
• United Kingdom– 13.1%
• Germany– 4.9%
• Ireland– 8%
• Netherlands- 4.5%
• France– 3.4%

In the center of Paris, the rental yield from parking spaces ranges from 6% to 8%.

Investments in central areas

Experienced investors pay attention to parking spaces located in central areas, such as:

• Town Hall Quarter
• Mare
• the left bank of the Seine
• Saint-Germain-des-Prés
• “Golden Triangle” (8th District)

It is characteristic that such parking spaces appear on the market very rarely, yet interest in them does not fade. Surprisingly, the cost of parking spaces on the same street can vary by as much as 30% compared to neighboring, less privileged locations. Overall, purchasing parking spaces on the outskirts of the capital often does not yield the expected income, especially given that new residential complexes are increasingly being equipped with underground parking.

The cost of parking rental in Paris

Renting a parking space in the center of the capital of France can cost up to 500 euros per month, while in more remote areas, such as the 19th arrondissement, the price drops below 100 euros. According to Wall-Mark data, the highest rates are recorded in the following arrondissements:

• 1
• 3
• 6
• 7

Where rental prices range from 40,000 to 50,000 euros. In contrast, in remote areas, you can find listings with prices from 10,000 to 20,000 euros. The rental rate for a single parking space can vary from 45 to 500 euros per month. In small towns in France, the return on investment in parking is 7-11%.

Parking spaces in Barcelona

In Barcelona, new and stylish parking spaces are being offered, equipped with elevators, surveillance systems, and automatic gates. Prices for such amenities start at 25,000 euros. Owners of this type of property can rent them out, earning an income of 100 to 150 euros each month, which provides a return of 5 to 7% per year.

Parking spaces in the USA

In the United States, small parking lots can be purchased for $100,000. At the same time, a property worth $1 million can generate a net annual income (after taxes, management expenses, and insurance) of at least $45,000, which corresponds to a yield of 4.5% per year.

Factors affecting parking costs

The prices for parking spaces are determined by their geographical location, overall condition, and the presence of security systems such as video surveillance and automation mechanisms. The best-equipped parking lots with high safety standards tend to have higher costs.

Investments in New York

In New York, many parking lots have what are known as "air rights," which allows them to be used for expanding territory, considering them as sites for future construction projects. For example, Gary Barnett, the head of the construction company Extell and the creator of the famous skyscraper One57, located near Central Park, has acquired over 200 parking lots in Manhattan with the aim of reselling them for the development of construction projects. Such parking spaces are likely to be transformed into underground parking garages beneath new buildings.

Introduction to Investing in Parking Spaces

Considering all the above information about parking as an investment tool, several important conclusions can be drawn. The realization that parking spaces in the largest cities in the world are becoming not only a necessity but also an attractive financial opportunity opens new horizons for investors.

Rising parking prices

Parking prices are reaching record levels, and this is not just a fleeting trend, but a sustainable one, as evidenced by examples from Manhattan, London, and Hong Kong. Each of the facts presented highlights the reliability and profitability of investing in parking spaces.

Advantages of investing in parking lots

• High demand:The demand for parking remains high, and economic upheavals have little impact on the number of cars on the roads.
• Low operating costs:Such investments are becoming increasingly popular among investors seeking stable income.
• Long-term perspective:The long-term development perspective of these assets makes them less susceptible to risks.

Types of parking spaces

It is also important to remember the differences between types of parking spaces. Multi-level parking garages provide greater security and a more stable income guarantee compared to surface lots, which may be subject to demolition or redevelopment for housing. Therefore, when choosing a parking facility for investment, it is essential to consider not only its location but also the type of construction.

Conclusion

In conclusion, viewing parking spaces as an investment asset can be a very profitable move. Considering the enormous potential for price growth, the combination of stable income and low operating costs makes it clear that investing in parking spaces is not just a legislative step, but a strategic approach to expanding one's capital in today's market.

If we consider parking lots as part of a diversified investment portfolio, their value becomes even more apparent, thereby creating opportunities for increased returns in the future. Thus, those who understand the appeal of this niche have a real chance of successfully expanding their investments.