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Monday, August 30, 2010

Do CBD parking prices in your city look expensive when compared with alternative uses of that space?

If a parking deck in a city-centre building were not parking, what else could it be? There are various possibilities. A basement parking lot could have housed retail or a food court for example. Ground level parking might otherwise be retail. Parking decks above ground level could otherwise be office space.

This Bangkok building (in Siam Square) has many storeys of parking which could have been office space of course. Is it useful to ask how much income the parking levels yield, compared with the office levels?

So does parking provide returns on investment that are comparable to those alternative uses?

It is not easy to answer that question but insights emerge from comparing city centre parking prices with city-centre office rents. To do that we have to express both as a price per month per square metre. This is possible with the help of data on both from Colliers International.

The underlying idea here is the opportunity cost of structured parking in central business districts (CBDs). In other words, we get an idea of the cost of the built space that is used as parking by thinking about the cost of similar space that is used for something else.

I shared data that made this comparison in a post at Reinventing Urban Transport in May 2010, titled: Parking prices from a different angle


Below the fold are the key parts of that May 2010 post (edited and improved a little)


Is $400 per month for season parking outrageous or reasonable? Well, it depends ... But what does it depend on? One suggestion: the price of a hamburger! This rule-of-thumb for hourly parking prices comes from Pete Goldin at the Parking World blog, citing Dr Adhiraj Joglekar, founder of the website driving-india.blogspot.com. Hmmm. I guess they are alluding, tongue-in-cheek, to the Big Mac Index from the Economist. This index uses burger prices to correct for differences in the purchasing power of money in different countries.

But seriously, what is the right comparison?

Purchasing power is obviously not the only issue here, since parking prices usually vary from place to place within every city. Prices range from zero in many suburban parking lots to 'expensive' in the city centre. But the last time I looked burgers were not free-of-charge in the suburbs.

How about comparing parking prices with property prices?

After all, parking is a use of real estate, right? Space that is not used for parking could be used for some other real-estate use. India’s National Urban Transport Policy says explicitly that public parking prices should take account of land prices (although it doesn't say how to make this happen).

So, as part of the Asian cities parking study, I compared city-centre parking prices with city-centre office rents.  This was helped by nice data from Colliers International on both CBD parking prices and Grade-A office rents for many cities around the world.

The graph below is the result, using their 2009 data.

Click on the image for a larger view.

Interesting?

The contrasts are really striking. Possible inaccuracies in the data and volatility in the prices cannot possibly explain such huge differences.

We have cities near the diagonal line where CBD parking rents per square metre are comparable with Grade A office rents. It is the solid line - sorry it does not look diagonal. Amsterdam and Copenhagen are prominent along with London City, Vienna, The Hague and Sydney.

At the other extreme, Delhi and Mumbai in the upper left part of the graph have expensive office space but extremely cheap parking. Parking prices clearly do NOT yet take account of land prices in Indian cities.

Jakarta and Bangalore at the bottom left have quite cheap office space and even cheaper parking. In Jakarta's case this might have something to do with the price controls imposed by the city government.

I was a little surprised by Singapore's rather cheap CBD parking relative to its CBD office rentals. This is likely to change as parking supply is now growing more slowly than other built space since 2003 when Singapore CBD parking requirements were lowered drastically.

Hong Kong and Tokyo are also intriguing. Their CBD parking prices are among the highest in the world. But from the perspective offered by this graph, such parking prices are not surprising given their expensive CBD real-estate generally.

What do you think? Are real-estate prices (rents) a useful comparison for parking prices? Can data like this provide any policy guidance?


NOTES:
In the graph both CBD parking prices and CBD Grade A office rents are shown on a rent per square metre basis. To convert parking prices per space per month to parking prices per square metre per month I used 19.5 sq. m. as a very rough estimate of the space required for a parking space, including aisles, etc. So $10 per sq.m. per month is about $195 per parking space per month. I believe the parking data is for parking in structures, not open lots.

The data for the graph came from:

  1. Colliers International. 2009a. Global CBD Parking Rate Survey 2009. Colliers International. http://www.colliersmn.com/PROD/ccgrd.nsf/publish/0EB9D100B7A442F8852575F600699A07
  2. Colliers International. 2009b. Global Office Real Estate Review: Mid-Year 2009. Colliers International. http://www.colliersmn.com/prod/cclod.nsf/City/31627F1939A8C67A8525764F007B44E8
 [Note: it should now be possible to repeat this analysis for 2010 but I have not done so yet.]

UPDATE:  A comment at Reinventing Transport alerts me that a similar study done for the UK which takes its inspiration from the original post can be found on the Colin Buchanan blog 

3 comments:

  1. But what this doesn't factor in how the value of office space might also be tied to the ability to park nearby. At least insofar as chief execs might be unwilling to take public transit, etc.

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  2. I would look directly at excess demand to get a sense whether prices are too low or high. How hard is it to find a parking space? Prices should be such as to keep most parking places occupied most of the time, but keep some vacancies, reflecting turnover. Peak load pricing probably makes sense (and perhaps no price is low enough, at some hours, to keep places occupied). There are too many other variables, such as packaging office space with on-site parking, to make your comparison indicative of much. Various parking options might be mandated by law and would affect the price of office space, rather than parking space directly. To evaluate the price of parking, look at excess demand for parking.

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  3. pricing parking space based on the opportunity costs of the land they use is reasonably efficient. however, the bigger picture is that parking is one critical part of the commuting cycle in a motorist. from home, to walking to car, driving on roads, paying road tolls, trudging through congested roads, cruising for parking spaces and eventually parking...parking is one key component of the travel costs and its pricing should take into account the marginal external cost caused to other public commuters from the driving. pricing it well can potentially achieve wider objectives in terms of reduced congestion.

    its pricing mechanism should achieve a deterrence effect on car trips and nudge people towards public transport. i think land use value may not be so relevant in pricing the parking spaces, although its exorbitant value could very well deter the average motorist. we probably need a more dynamic pricing mechanism such as the performance-based pricing that could effectively send a clear message to motorists on the urban's objectives behind pricing car park spaces (that is, to reduce traffic congestion, while equitably providing the right to own and use a car)

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