Office Tenant Demand for More Parking Remains Strong in U.S.
Despite Rise in Ride Sharing and Anticipation of Autonomous Vehicles
Based on a new report by global real estate consultant CBRE, office parking ratios in both downtown and suburban office markets across the U.S. and Canada are unlikely to see significant change in the next five years, despite increases in ride sharing and the anticipation of autonomous vehicles.
CBRE surveyed a mix of office leasing professionals and office investors, 75 percent of whom said that tenant demand for office parking will stay the same, or even increase, by 2023, as most workers--86 percent in the U.S.--still commute by car. In the same five-year period, parking prices will likely rise, especially in downtown CBDs.
When broken down by downtown and suburban office markets, 87 percent of respondents said that downtown parking ratios were likely to stay the same or decrease by 2023, while 81 percent said suburban parking ratios are likely to stay the same or increase.
"Tenant demand for office parking is going to continue to stay strong for the next five years, despite all the talk of worker mobility from ride sharing, autonomous vehicles and other on-demand transit options," said Andrea Cross, Americas head of office research for CBRE. "Parking requires long-term planning and therefore the challenge for office owners, developers and city planners is balancing current demand with future uncertainty--both in mobility trends and office densities/flexible space--while at the same time, understanding shifts in the value parking adds to an asset."
While many occupiers are moving to denser employee configurations, parking ratios have declined overall since 1990 due to better use of public transit. In fact, parking ratios for new buildings have decreased since 2000 in the 15 largest U.S. and Canadian office markets with the exception of Orange County, which has minimal public transit usage compared to the other markets studied.
Parking trends to watch, according to CBRE's report include:
Valet-style drop-off/pick-up zones
Many owners and developers are creating pick-up and drop-off areas in parking structures or adjacent locations to accommodate employees and visitors arriving via shared-ride services such as Uber and Lyft. Recent Trammell Crow Company developments Park District in Dallas and The Boardwalk in Irvine, California, feature central plazas for rideshare drop-offs and pick-ups. The capacity of these zones typically ranges from five to 15 vehicles.
In some buildings, landlords and employers are replacing traditional employee parking allotments with ride-sharing credits or services, which can serve as the sole mode of transportation for an employee or the "last mile" between a public transit station and an office. For example, The Irvine Company partnered with a ride-sharing provider on a pilot program to offer tenants ride-sharing credits between several local rail stations and the Santa Clara Square mixed-use development in Silicon Valley. In Northern New Jersey, Mack-Cali has partnered with Uber to offer employees free rides between eight of its properties and is incorporating pick-up/drop-off zones to accommodate tenants using this service.
Convertible parking structures
Some owner/developers with a longer investment hold strategy (10 years or more) are building parking structures that are easily convertible to other uses, which require higher floor-to-floor heights (12' to 14' for office space conversion) and other specific design elements that typically make them more expensive to build than traditional parking structures. CBRE's analysis found that the total cost of a convertible structure in Houston is 17 percent higher than that of a traditional structure, or $11 more per gross sq. ft.
"Investors with hold periods of 10 years or fewer are generally not willing to pay a premium for office properties with convertible parking garages, due to the increased cost and uncertainty around the future of autonomous vehicles," said Ms. Cross.
One potential solution for meeting current tenant demand for parking but providing future options is to build the parking structure half above grade and half below, enabling the owner to demolish the upper portion and build an alternate use over the subterranean parking, as Trammell Crow Company did with its 929 Office Tower in Bellevue, Washington.