HOW MUCH PARKING do suburban office tenants need today, and how much will they need in the future? When “The Suburban Office Parking Conundrum” (Development magazine, fall 2016) explored this issue, expert opinions varied. NAIOP therefore decided to ask members about their recent experiences with suburban parking and likely future trends. From Oct. 6 to 13, 2016, NAIOP conducted two surveys that asked suburban office developers as well as architects and engineers from throughout the U.S. about those experiences.
Focusing on previous trends, nine out of 10 developers who responded indicated that a range of 3.5 to 4.5 parking spaces per 1,000 square feet of office space has been adequate for leasing over the past decade:
While the 3.5 to 4.5/1,000 ratio has worked in the past, respondents indicated that tenants have been asking for more parking recently.
Nearly 90 percent of developers reported that, within the past 24 months, at least half of all prospective tenants were requesting ratios of more than 4.0/1,000:
When asked to forecast parking ratios in five years, the most common number offered, by about one-third (34.5 percent) of developers, was 5/1,000. About equal numbers (20 and 24.5 percent, respectively) projected higher and lower ratios of 6.0/1,000 and 4.0/1,000, respectively. Tom O’Keefe, CEO of O’Keefe Development, who has been developing office properties in the Seattle suburbs for 30 years, reports that the 4.0/1,000 ratio has held; he believes that it will probably continue, and that it has become the standard for brokers to convey to users. Only about one in 12 survey respondents projected parking ratios of 3.0/1,000 or lower.
Respondents’ speculation about future demand for parking are reinforced by their recent experience. About one-third of developers acknowledged that they had recently added parking to existing properties. Those reports were reinforced by NAIOP’s survey of architects and engineering consultants: Almost two-thirds of those surveyed (61 percent) had been asked to determine the feasibility of adding surface or structured parking, reinforcing the owners’ own assessments.
The consultants’ projections for future parking ratios were substantially lower than those of the owners, however. They ranged from 3.0 to 5.0 spaces per 1,000 square feet of office space, distributed almost equally between ratios of 3.0, 4.0, and 5.0/1,000. Only 9 percent forecast a higher ratio (6.0/1,000), while another 9 percent forecast a ratio as low as 2.0/1,000.
One broker surveyed, Paul Giannone, executive managing director of Cushman & Wakefield in New Jersey, was surprised that the survey didn’t indicate demand for an even higher parking ratio. “I always thought the [conventional] ratio of 3.2/1,000 was inadequate,” he reports, because “our recent experience generally falls in the 4.5 to 5.5/1,000 range, with some industries, such as insurance companies, requiring six spaces per 1,000 rentable square feet in suburban markets. The current trend is [to increase] employee occupancy to five to six people per 1,000 square feet in an attempt to save money. This new space standard has increased demand for parking, making buildings with only 3.2 spaces per 1,000 square feet difficult to lease. The increased density is also an issue for older HVAC systems that are designed for a capacity of four employees per 1,000 square feet.”
The most common “write-in” comment by respondents was that increasing density of employees — for e-commerce, call centers and other labor-intensive office users — is increasing parking requirements. According to one developer, “Offices are crushing more and more people per square foot, so more parking is required.” Several respondents noted that balancing this trend are locations with good transit and other more urban transportation options, such as car-hailing services like Uber and walking.
The cost of developing additional parking can be significant. The vast majority of developers who estimated the cost (both hard and soft) of additional surface parking spaces reported that it ranges from $2,000 to $6,000 per space. Giannone adds that, with development costs for new suburban office space in New Jersey at about $350 per square foot, the costs of structured parking decks in new developments are currently not supported by market rents. (Structured parking can cost from $12,000 to $25,000 per space.)
In one case, he notes, Cushman & Wakefield had to get creative to handle increased parking demand in a building that was 75 percent leased. “An agreement was made with a new tenant that needed six spaces per 1,000 square feet to use the spaces allocated to the vacant units until the vacant space was leased. We agreed that once the building was leased up, parking would be added in the available green space and the cost to create more surface parking would be shared, 60 percent by the tenant and 40 percent by the landlord.” The theory was that the additional parking would benefit the tenant initially, but in the future would benefit the landlord.
Parking at suburban office projects continues to be a key issue, and these survey results indicate there is still great uncertainty over likely trends. Because parking — particularly structured parking, which may be the only option for adding parking in denser inner-ring suburbs — is so expensive, developers must carefully examine tenants’ parking requirements. The newest piece of this puzzle, the coming impacts of autonomous vehicles, was not addressed in this survey, but will be explored in future articles.
Robert T. Dunphy, transportation consultant; adjunct professor, Georgetown University Real Estate Program; and emeritus fellow, Transportation Research Board