Landlords look to the parking lot for new revenue

December 31, 2018

Minimum parking requirements are coming under increased scrutiny in this age of shuttering department stores and abundant transportation alternatives, and amid the rise of pedestrian-oriented retail and mixed-use projects. Rather than insisting on these requirements (typically amounting to about five parking spaces per 1,000 square feet), many municipalities have already reduced or else eliminated them altogether, or they are considering it.

 

For shopping center owners, these changes mean greater operational flexibility and a potentially healthier bottom line, particularly at shopping centers undergoing redevelopment or adding on nonretail tenants. Reduced parking requirements may allow landlords to carve out pad sites in underused parking-lot sections, say, thus helping to boost traffic and income. And reduced parking could save developers some $20,000 per space in construction costs, according to Christine Banning, president of the Washington, D.C.–based National Parking Association. It can cost as much as $100,000 to build a space in a parking garage, she says.

 

“The traditional parking ratios of five spaces or so per 1,000 square feet are antiquated for a variety of reasons,” said Brad Sanders, a CBRE senior managing director based in Cleveland. “Parking is no longer one size fits all; it’s driven by the specific needs and peak demand times of each of the users.”

 

Some municipalities are reducing minimum parking requirements in urban districts to foster more housing, while others are taking a broader approach. San Francisco’s Board of Supervisors is reportedly on track to do away with minimum parking requirements in that city. Knoxville, Tenn., meanwhile, reduced minimum parking requirements for commercial uses last year by roughly 20 to 40 percent; in some cases, the city has established maximum parking requirements instead. Those changes are part of an overhaul of 50-year-old zoning regulations, says Gerald Green, executive director of the Knoxville–Knox County Metropolitan Planning Commission.

 

“The last thing we want to do is to turn away customers because they can’t find a place to park”

 

“We’ve had a substantial amount of development and redevelopment occurring by variance because our existing code doesn’t accommodate the goals of developers or the city,” Green said. “We’re trying to provide developers flexibility by allowing them to respond to market demand instead of imposing an arbitrary parking number.”

 

Parking requirements have long been a topic of debate, but the latest reexamination began around 2005, with the publication of a book titled The High Cost of Free Parking, according to David Fields, a board member of the Chicago-based American Planning Association, which published the book. In that tome, author Donald Shoup, a professor of urban planning at UCLA, calls for the elimination of off-street parking requirements. Shoup, whose follow-up book, Parking and the City, was published last year, accuses urban planners of creating parking requirement standards based on flawed studies, and he also charges that cities largely copied one another when establishing their codes.

 

Fields concurs. “Today cities have realized that there’s not a lot of science behind telling developers how many spaces they need,” said Fields, a principal with transportation systems developer Nelson-Nygaard Consulting Associates, in San Francisco. “They understand that developers aren’t going to under-park their site and hurt their bottom line.”

 

The key to generating more efficiency is to gauge parking ratios along with the peak and nonpeak times of each tenant

 

That was the case in Shaker Heights, Ohio, where RMS Investment Corp. is developing the Van Aken District, a transit-oriented development on the former site of two strip centers, at a thorny seven-way intersection. The city and RMS Investment teamed up to create a parking plan for the development, whose first phase features a 21,000-square-foot food hall, some 80,000 square feet of retail, a 64,000-square-foot office building and 103 apartments. The project includes a 325-space garage that serves office workers during business hours and shoppers at other times, along with street parking and overflow surface lots targeted for development in later phases.

   

“Shaker Heights recognized that the parking code was outdated for what we wanted to create,” said Luke Palmisano, president of Cleveland-based RMS Investment. “So from day one, we weren’t restricted by trying to meet some preordained number.”

 

Flexibility on the part of retailers will ultimately cut the traditional parking ratio back by half, predicts Grant Gary, president of brokerage services at the Fort Worth, Texas–based Woodmont Co. In the past, each store in a center often sought five spaces or more per 1,000 square feet for its own box, Gary explains, which fueled a parking glut. But now they are more aware of cross-shopping habits. What is more, he says, retailers recognize that such uses as gyms, which were long excluded from shopping centers because of parking concerns, generate traffic largely during off-peak retail hours.

 

“Retailers, landlords and developers are collaborating more than in previous times,” he said. “They’re embracing change and are exploring how to work with cities to drive traffic and allow shopping centers to evolve.”

 

“Typically, a department store’s decline exacerbates an overabundance of parking”

 

Shopping center owners replacing department stores or adding apartments, hotels or offices to their properties are among those actively engaged in evaluating parking requirements. Typically, a department store’s decline exacerbates an overabundance of parking. Yet, replacement users such as grocery stores, restaurants or entertainment venues may require even more parking than the original department store, even if only during certain periods of the day or on weekends.

 

The key to generating more efficiency is to gauge parking ratios along with the peak and nonpeak times of each tenant, says Greg Maloney, Atlanta-based CEO of Americas retail for JLL. The solutions may include providing valet or premium parking, establishing package-pickup lanes, or sharing parking with nonretail tenants located on newly created outparcels, during their off-peak hours. “We’re looking at every single property and trying to best utilize the space to make it more profitable while maintaining the proper amount of parking for customers,” Maloney said. “The last thing we want to do is to turn away customers because they can’t find a place to park.”

 

At the transit-oriented Assembly Row mixed-use project, in Somerville, Mass., Federal Realty Investment Trust is using Soofa park benches, which include charging stations, as Lyft pickup and drop-off locations

 

Shopping center and mixed-use developers are also adjusting to changes in consumer transportation and purchasing preferences by designating load and unload areas for car-hailing and car-sharing services. At the transit-oriented Assembly Row mixed-use project, in Somerville, Mass., Federal Realty Investment Trust is using Soofa park benches, which include charging stations, as Lyft pickup and drop-off locations, says Matt Ehrie, a Federal Realty vice president who is general manager of that property. Assembly Row has also worked with General Motors’ car-sharing subsidiary Maven to establish a pickup and drop-off hub inside one of the property’s garages, he says. “We’re certainly seeing people use different types of ways to get to our property,” Ehrie said. “It’s not putting as much demand on us to build garages, which enables us to use space more effectively.”

 

Observers anticipate that autonomous vehicles, too, will bring significant change to parking layouts, changes that will entail the designation of exclusive parking and charging areas for those vehicles. But so-called Level 4 cars, which will drive themselves to set destinations without human interaction, are still some 15 years in the future, so investing today to prepare for them makes no financial sense, argues the National Parking Association’s Banning. Be that as it may, counters Gary, developers do well to begin planning for their arrival.

 

“As shopping centers sign 10- or 15-year leases, they will need to include provisions for autonomous vehicles that allow the retailer and landlord to make parking adjustments,” asserted Gary, “versus having to go back and amend the leases.”

 

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