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Copyright © LK 2002 All rights reserved.
This is the text of a paper presented at the Irish Parking Association's 1998 National Parking Seminar at the Hudson Bay Hotel, Athlone on Friday 18 September 1998 by Liam Keilthy, Park Rite Ltd.

Articles:
* The Economics of Pay Car Parks
* Car Parking in Towns - A Very Big Challenge Today!
* The Economic Boom in Ireland: Parking Implications
* The Value of a Parking Space
* Cheaper parking on the way?
* Hospital Parking: Cars, Cranes and Confusion
* The Great Shopping Centre Car Park Space Hunt

Introduction

Park Rite is Ireland's leading car park management company, with over 20 years of experience in the design, development and operation of large scale public car parks. The company's origins lie in the development by Irish Life of the underground car park at Abbey Street (350 spaces), and later in 1980 the 1000 space Ilac Centre MSCP. Today the company manages over 5,000 spaces in 14 sites that range from Tallaght Hospital and Arnotts to surface sites in Bray and the city centre.

Hardly a week goes by without a call to my office from a local authority, a hospital, a shopping centre or a trade association asking the same question:

Would it be possible to develop a Multistorey Car Park in my town ?

To help formulate an answer to this question, I want to address three aspects of commercial car parking economics today:

  1. Key Factors in the Commercial Success of Any Public Car Park

  2. The Actual Numbers Involved

  3. Some Important Ratios to Consider

1. Key Factors in the Commercial Success of Any Public Car Park

When I am asked to assess the commercial viability of new car park sites and the following are the critical issues I look at:

Proximity to Destination

Parking is a secondary activity, as people only park in order to do something else - shop, work, etc. Proximity to an attractive destination is the critical success factor in any car park project.

Location

Usage is determined by proximity to a significant traffic generator such as a shopping centre, leisure complex or office block, and accounts for 80% of the parking decision. Drivers will not willingly walk more than 180m from their car to their ultimate destination, and in local shopping centres this distance is much shorter. Patterns of usage vary from one car park to another depending on the mix of patrons served and the nature of the traffic generators - national shopping centres are characterised by distinct morning and afternoon peaks and relatively long average stays - 2 to 3 hours, while local shopping centres have comparatively flat usage patterns with high volume low stay visits. Cinemas have different patterns from hospitals, offices differ from event related facilities, e.g. rugby or GAA grounds.

Capital Cost

The cost of developing a car park includes the site, the structure, fitout and tax incentives where applicable. Modern MSCPs cost from 4,500 per space to 10,000 per space to construct, depending on finishes and specifications but are averaging about 7,500/8,000 per space, excluding VAT. Underground car parks are much more expensive, ranging from 10,000 to 15,000 per space. A surface site should not cost more than 2,000 per space to surface, light, mark, sign and fence.

Tariff

Price is critical to the revenue generation capability of any business and parking is no exception. Short stay parking has been repeatedly demonstrated to be price insensitive, provided it is not in competition with convenient free parking. Long Stay parking is very price sensitive, with people willing to trade off longer walking distances for lower prices.

Operating Hours

The operating hours of a car park must be tied to the needs of the local traffic generator(s) which it services, e.g. shopping centres, cinemas, theatres etc. As staffing costs are the largest single cost in the car park budget a balance must be struck between operating hours and these costs. Practical experience suggests that the car park needs to be open from about 1 hour before the centre opens until about 1 hour after it closes, and these hours need to be clearly posted throughout the car park.

Tax Status

Recent Urban Renewal initiatives have been extended to public multistorey car parks, but this scheme has now expired. Some designated area proposals may include MSCPs, and these should qualify for accelerated capital allowances, double rent allowances and rates remission, but these should be checked out in detail and with appropriate expert advice. The double rent allowances have the ability to make dramatic impacts on the value of a facility. Local authorities, charities and state institutions do not fall within the tax net and so do not qualify for these incentives, and until now have been deemed exempt from the VAT net also. This has dramatic implications for the finance of new car parks, as they are liable for VAT on the cost of the development but cannot recover VAT on inputs. They do not have to collect VAT on their receipts but do pay VAT on operating expenses. With VAT at 21%, the same car park yields c. 13% more for an exempt organisation than for a commercial organisation.

2. The Actual Numbers Involved

In this section I have outlined two illustrative models, one for a multistorey and one for a surface car park.

Budget for a 500 Space Daytime MSCP:

Spaces

500

Operating Days pa

310

Operating Hours per day

12

Average Occupancy

50%

Charge per Hour

1.00

Gross Income

930,000

Vat @ 21%

161,000

Net Income

769,000

Operating Expenses

Manager - gross

25,000

Attendants (2 x 7.00/hr gross)

55,000

Rates 100 per space pa

50,000

Maintenance - Building, Equipment & Systems

17,000

Insurance - PL + EL + Building

10,000

Consumables - tickets, cleaning, supplies

8,000

Accounts/Administration/Audit

5,000

Sundry

10,000

Total Operating Expenses

180,000

Operating Profit

589,000