There are a lot of things people consider when they look into buying a condo or co-op in New York City. Location is important, safety is an issue, and the size of the space is always a factor. But one thing that may get overlooked is the importance of a public parking facility available to its residents.
Any car owner who has ever tried to live in the city knows what a pain it can be to find parking on a regular basis and at a price that doesn't make you want to drive your car into the Hudson River.
Co-op and condo buildings that offer a parking facility not only alleviate parking headaches by guaranteeing residents a place to park their own vehicles, but can also offer a financial boon to shareholders and unit owners by providing extra income.
"There are two benefits I see for owners," says Steven Aiello, a parking management consultant of Standard Parking in Manhattan. "One obviously is that it controls their destiny in many cases as they're able to provide parking to their own people. Then of course there's the financial aspect; they can earn a cash stream. An on-site parking facility is an asset whatever way you look at it."
In terms of parking - like just about everything else - things in New York City are quite different than most of the country. Because of the subway system and other underground infrastructure, office buildings are rarely allowed to put much parking underneath their property, unlike other big cities where the city insists that buildings accommodate the vehicles of all the people working inside.
"New York is the opposite because [the city government] doesn't really want people to drive into the city, so they minimize any type of parking an office building can have," says Gunnar Klintberg, vice chairman of Holberg Industries Inc., a large parking management firm based in Greenwich, Connecticut. "That makes parking a valuable component for any co-op or condo to be a part of, as they can utilize the extra room to make money."
Therefore, new co-ops and condos being built in the area can take advantage of the fact that they can build their own private garages.
"Anybody today that can have parking to use to attract buyers of condos or co-ops [should take advantage of it]," says Larry Lipman of Manhattan Parking, another lot-and-garage management company. "I think it's very beneficial to have a garage at the bottom of the building to offer. If the garage is strategically located, you can take in transient parking as well, and it can be a big revenue source for any co-op or condo."
For those buildings that already have a parking garage, a decision must be made on how to run it properly. Just like any piece of real estate, it costs to operate and maintain a garage facility, and it's important that the shareholders get the best value for their property.
There are two basic managerial styles to choose from and each has its pros and cons. A co-op corporation can lease the property, in which the board is basically turning over the keys to a parking company and having them run the facility without interference, giving an agreed-upon cut of the profits to the co-op, or the building can arrange a management contract, where the co-op gets more say, but the amount of profit is apt to fluctuate from month to month.
"You can lease [the garage] to a parking company and the company will pay so much a month to run the facility, and bring in transient parking," says Klintberg, "and whatever they can and any money they make above what is agreed upon is their money," says Klintberg. "With a management contract, you pay the parking company and have control over [the garage]. There's a fee to the building's management company to run the parking but the building would foot all the costs and get all the revenue. It's a lot more involved."
Although management contracts are more popular in most of the country, that isn't the case in New York.
"Manhattan is kind of unique in that it's a very lease-oriented market," says Lipman. "Outside New York, I would say most facility owners or landowners prefer to maintain some control over certain issues. They contract a parking management company to run the facility and protect their interests, but the parking company would run it according to the parameters established by the ownership."
The reason leases are so much more popular in New York is because of the staggering volume of cars that can come and go through a garage on any given day.
"With a lease, you get a check and you never have to worry about anything," Aiello says, but adds that the tide may soon change. "Parking has come a long way. Twenty years ago parking was an "˜in-the-dark' kind of business. No one knew exactly what the revenues were because everything was manual. Now that financial reports are turned in monthly with audits and statistics, landlords are much more comfortable with management agreements.
When you take away the margin of the unknown, you can almost always generate a higher return for the owner," Aiello continues. "Leases are ingrained in the mind [of New York City's co-ops], but I would suggest considering a management agreement. It really doesn't change or make them more involved, but it makes it transparent so [boards and management] can see what's happening. Under a lease, you are just getting a check each month, and you can't be sure what the operator is making - and operators can make a lot of money. A management agreement is a very good thing to do."
And there's actually a third choice boards and management can make when deciding what to do about their parking facility - though most experts feel it's wishful thinking in New York City: they can choose to run the garage themselves with their own employees. Why this might work in a smaller city, most parking experts here think either leasing or management is the way to go.
"Most people think of parking as a very simplistic business, but it really has a lot more too it than that," Aiello says. "There are things like drive-in ratios, and percentage occupancy - which we call diversity - to consider. You have a percentage of your people who are parking there who are never in the facility at any given time. They could be on vacation, their car's in the shop. Some you have a percentage who are gone during the day because they may drive to work, summer vacancy ratios. We have so many statistics that allow us to know how much we can oversell to use each space. That tweaking of the capacity in the supply and demand really can make a difference of anywhere from 20 to 30 percent in revenue - that's the biggest advantage. We always say to our clients that we can run it less expensively and with fewer hassles than they can, simply because it's what we do every day."
When talking money, the potential revenue per space in Manhattan depends on the neighborhood, traffic, and the availability of on-street parking. "Annually, a space can command between $4,000 and $7,000," says Lipman. "Monthly rates can be anywhere from $250 to $550."
It might seem like a practical idea for Manhattan co-ops to invest in garages and make them their own, but because of the strictures of the 80/20 rule - which stipulates that at least 80 percent of a co-op building's income must come directly from shareholders, and no more than 20 percent can come from leases, rent, or other business venture - it's not something that is really ever done. However, any new condo building that is going up in the city almost always has a parking garage attached to it now.
"I don't know many condos going up today that aren't including parking," Klintberg says. "Why wouldn't they?"
While in the construction stage, it's important for a board or management team to search for a parking management company to work with.
"If contacted early, we can work with their developers and consult on the design to maximize spaces," Aiello says. "Some places wait until they get closer to completion and they put them out to bid."
Contracts with parking managers are also different in New York. Lease contracts tend to be three to five years elsewhere, but in the city they tend to be 10 to 15 years, though parking companies are flexible and there are usually escape clauses built into contracts if one party is unhappy with the arrangement.
When management contracts do expire, a co-op board would do well by going out and asking for bids.
"You have to follow the market and know what buildings are coming up and try to get in early," Klintberg says. "With existing contracts, you need to know when leases expire - although the parking operator who has the garage has an enormous advantage, because they know the garage inside and out. Someone else from the outside would almost have to guess what the total revenue is because many times the co-op and condo owners don't know how much the garage is really making."
Whatever borough you are talking about, New York will always seem to have more cars than parking spaces available, and for a homeowner to come home and not have to worry about circling around the block for a parking space, that's something that's almost as valuable as park views or a walk-in closet.