Ever think about parking garages as being cash cows for developers and investors? If not, start…because this segment of the real estate market is changing…quickly.
VTS, one of commercial real estate’s leading leasing and asset management platforms, brought together brokers, investors, agents, thinkers for its first conference called Accelerate: Premier Innovations Conference for the Commercial Real Estate Industry in early-mid June this year. Among the many topics discussed by industry leaders at Accelerate was parking garages.
Some venture capital investors at the conference (and on the streets where you live) say that climate change and self driving cars are game changers for real estate. Always including rising interest rates and/or tax reform into the mix of industry challenges, Jeremy Levine, partner at Bassemer Venture Partners, says that self driving, electric cars will put an end to pricey Manhattan (and other urban center) parking garages.
As a panelist at one of Accelerate’s break-out sessions, Levine said, ” Operators of (parking garages) will go from selling parking spaces to selling electricity through charging stations.” He went on to say that he was “…not sure what the timeline is. The problem is that the minute it’s clear that the value of all those parking spaces go to zeroes, the change will be lightning fast. If you wait a second too long, you’ll be toast so it’s better to get rid of those assets…or repurpose them way before…”
On the other hand, three newly constructed luxury buildings just hit the market in Chicago asking for $65,300./space in its parking garages. The annual rent for the overall garage space in one building is $3M with rent escalations annually.
All panelists, speakers and attendees of the Accelerate conference agreed that every segment of the real estate industry (parking garages/overall commercial/overall residential) is inefficient. Jeff Horning, partner in Insight Venture Partners, summed it up well. “The use of machine learning and big data are likely to shake up (the entire) business…Your ability to predict the future is going to be determined by how well you use data.”
Charging stations, parking garages and every other real estate asset must utilize data as effectively and as out-of-the box creatively as possible.