Apartment communities are always looking for ways to boost the bottom line. Owners exploring ancillary revenue opportunities such as pet rent, storage lockers and gym memberships often are able to tip the scales from an average year to a good one. Turns out, one of the biggest opportunities for NOI growth might be found in the parking lot.
Those vacant parking spots at your community can be converted to ancillary income as innovative, flexible rentals, and for more than a few bucks a month. As the sharing economy trend continues to take hold, think of it as the Airbnb of parking.
Quick example: A community in Toronto was using 223 of its 246 spots. In a high-demand area for parking, 23 spots a day were going unused. The community adopted a flexible rental program to fill the vacant spots, and its monthly parking revenue grew from $22,300 to $25,938. Projected over a year, parking revenue climbs from $267,600 to $311,263.
That’s a monthly boost of $3,638 and an annual increase of $43,663. But that’s only half the story. Based on a 5.5 percent cap rate, the extra revenue increased the property value by $793,745 in the year.
To be clear, this concept won’t work for every community. This idea is rooted toward communities in locales where a parking shortage exists. Downtown areas and those in bustling college submarkets are more likely to benefit than those in a less congested area on the edge of suburbia.
But the opportunities are there, and each day, several parking spaces — and potential monetary gains and property value increases — are left vacant. That includes student housing communities, where codes typically require only 0.5 parking spots per student and one per employee. But in locales where few students drive, spots are becoming increasingly available and can be put to use.
The shared parking concept differs from that of home sharing in that the topic isn’t as polarizing. While the student housing and multifamily industries are beginning to warm up to companies like Airbnb on some level, the associated risks aren’t as prevalent with the shared parking. Rather than having outsiders within your apartment homes and among your community, these outsiders simply leave their vehicles in the space.
But how does it work? You have the extra space and you want to fill it, but you don’t want to hire an attendant to usher in the allotted amount of parking-seeking vehicles each day. First, in most cases, think of it on more of a monthly basis instead. Apartment owners and managers partner with a third-party provider that specializes in managing and monetizing parking to help fill the spots through a variety of channels.
By creating an online marketplace of available parking and contacting local businesses in the area, a third-party parking rental partner has the ability to offer a better parking rate than normally available in the market — on average 20-30 percent less than a commercial lot. This reduced cost combined with flexible contracts and prime parking location ensures apartment owners and operators the greatest return on investment.
While this concept was unearthed in Canada, the U.S. serves as an even stronger candidate for success. Proportionally, there are more multifamily developments in the U.S., and these companys — including those in the student sector — are recognizing the benefits of partnering with third-party providers and using technology to create ancillary revenue.
With the increased popularity of Uber and Lyft and the millennial tendency to steer away from vehicle ownership in favor of on-demand access, communities that were once packed to the brim with a long waiting list suddenly have spots available. The gradual increase of spaces has been noticed by developers, who are factoring less parking spots into new developments. But for existing communities with fewer vehicles in the lot, the newfound space isn’t necessarily a bad thing, as it can drive newfound ancillary revenue.
Alex Enchin is the founder of WhereiPark.