With buildable land usage shrinking in urban areas and urban living pulling more and more residents from suburbs and rural areas, undeveloped parking lots are becoming urban land opportunities.
According to the commercial real estate agency, Coster, sales of undeveloped parking lots have surged in the past two years. This trend is being driven by lot owners looking to cash in on a booming real estate market and developers who are constantly seeking the choicest land sites in town.
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According to James Letchinger, founder and CEO of JDL Development, “From a landowner’s point of view, values have increased tremendously over the last several years and it’s a great time to capitalize on this (value increase.) The reason these parking lots) are so valuable is because many are in the middle of really strong locations.”
Despite the parking industry being strong with revenue up +1%, change is coming to this market segment. According to IBISWorld, annual revenue growth is expected to shrink -0.2% through 2024, there is a surge in public transit and ride-hailing service demand, there is increased traffic congestion and, “Ultimately, these trends are anticipated to gradually reduce the need for parking facilities moving forward,” according to IBIS.
Meanwhile, parking lots in some metros are ripe for development. In Ocean City NY, for example, a one-acre parking lot sold for $4.5M and in Atlanta, another lot sold for $10.9M in June of this year. A lot in Boston sold for $40M in July of this year and in Denver, Pepsi sold two lots across from one of its bottling plants for a combined $36.1M. Another lot, 25,000 square feet, sold in Denver for $17.5M, a record $700 square foot deal for undeveloped land in the Mile High City.
According to Jay Levell, co-founder of White Point Development, “If you think about what (these parking lot owners) paid for these lots back then and the income coming in now, it’s absurd. Even though it takes time for the development process to play out, during that time, you have income coming in that can pay for all or a portion of those costs and/or provide some modicum of a return…”while waiting for these high returns to actually materialize.
Thanks to the New York Times Tom Acitelli for source data.