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Car parks estimate

Car parks estimate: an attractive risk/return profile

Garages, boxes or open parking, car parks represent attractive investments for investors seeking diversification: the risk/return profile makes car parks an investment of interest compared to other core asset classes.

In a highly competitive market, institutional investors turn to public car parks that they 100% own or in voluminous lots, often as part of emphyteutic lease contracts and public domain concessions. In this context, while location remains an essential criterion for estimating a car park’s value, operating conditions are decisive.

  • 5 %

    Car parks’ average profitability in France

  • 10 000 €

    Annual income that can be generated by a public parking space

  • 25 000 à 75 000 €

    Price of a parking space in Paris

2016 - Research - BNP Paribas Real Estate

Car parks evaluation: our expert’s point of view

Vincent Verdenne

Real estate expert, car parks adviser

What are car park asset’s distinctive features?

The initial investment in car parks is lower than in that of residential, work is rare and the rental return superior. In Paris, the profitability of a parking space rented by the month is around 5.8% compared to 3 to 4% in residential real estate. Public car parks in which spaces are rented by the hour can generate even higher revenues, in the order of €10,000 per year for a place, but they require an operator.

Therefore, operating conditions become an important criterion for determining a car park’s value, alongside the location of course which must remain the first point of attention.

What trends can be observed on the market?

The market remains tight today. Car parks still present a major challenge in preserving the attractiveness of cities and business districts: the lack of car parks is the 2nd criticism cited in their neighbourhoods by the French, who would lose nearly 70 million hours a year looking for a parking space.

But there are shifts in the market. Public policies aim to restrict car traffic in most major cities. As a result, when 42% of Parisian households owned a vehicle in 2006, they were only 36% in 2015. Demand for car parks is therefore beginning to decline, sometimes sharply (-30% in Paris in 3 years) and prices are falling in some cities (-2% in Paris between 2012 and 2017). However, there has been a corresponding sharp increase in the greater suburbs, particularly near train stations. Outside of Paris, the trend is similar. A medium-sized city such as Rennes recorded a 14.7% increase in prices, while Lyon posted a 4.4% increase.

Business models also tend to evolve. While some urban areas are very tight in terms of parking, many car parks remain underused. These include parking lots in office buildings, hotels and social landlords. For a few years, we have been witnessing the emergence of new players that offer site pooling services, associated with the dematerialisation of rental management and mobile reservation systems. This trend could have an impact on the profitability of traditionally managed car parks.

What do investors expect from this asset?

A well managed and well located car park always offers a very favourable risk/return profile, making it an attractive investment compared to other core asset classes. Car parking is therefore positioned as an interesting asset of diversification, and new institutional funds are regularly launched.

While the market largely attracts private investors for whom the purchase price of a parking space is very affordable, institutional investors prefer large areas and public car parks, which they own 100% or in voluminous lots, often in the context of long-term lease contracts and public domain concessions. In this context, while location remains an essential criterion for estimating a car park’s value, operating conditions are decisive.

Faced with new uses, investors will be attentive to the number of terminals made available for electric vehicles, but also to the possibilities of pooling parking spaces offered by the car park (networks, access security management, etc.). Finally, in certain areas where the demand for parking spaces could decrease, the conversion potential of a car park, often limited by regulations, can be decisive (conversion to storage, last mile logistics, etc.).

What are the main criteria for evaluating a car park?

Car parks are complex assets to estimate because many variables can be taken into account. If location remains criterion no. 1, the management method and the capacity to adapt to new uses become unavoidable issues.

Location and configuration

Downtown location, security level, boxable pitches, depth underground

Operating conditions

Quality of the operator, possibility to rent by the hour or by the month...

Capacity

Critical size to amortize operating costs

Equipment

Presence of electrical terminals, elevators, quality of accesses

Car park’s valuation requires to rely on an important track record and on a fine knowledge of the urban dynamics at work around the site. It is also essential to know perfectly the business model of public car parks and year-rented car parks in order to assess the investment’s profitability as accurately as possible.

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