Copyright © LK 2002 All rights reserved.
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
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.
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.
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.
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.
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.
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.