Multifamily development is currently an extremely profitable CRE sector, with apartment demand strengthened by an improving economy and shortage of residential homes for sale. Rents for the third quarter of 2018 are up 2.9% compared to a year ago, and occupancy rates are hovering around 95.8%. A lack of affordable housing, particularly in large urban markets, also continues to be a challenge. One of the biggest uncertainties developers face in their multifamily investments is how much parking to invest in, with parking logistics sometimes being the difference between a deal working out and falling through. Apartment renters still rely on cars at least some of the time, and expect these amenities in their apartment rentals. However, today’s tenants are far less dependent on automobiles, especially if they live in an area or development with amenities close by. Furthermore, if ride sharing and self-driving cars change habits and the design layout of buildings, owners and investors may end up with obsolete (and, at $30,000 per space, expensive!) unused real estate.
With parking design and implementation so expensive and unpredictable, what considerations should developers take into account before embarking on a multifamily project?
Estimate how much parking is enough for a new apartment development based on the location
The first step should be to engage a knowledgeable consultant to study the local Zoning Ordinance. Once you determine your Zoning, development parameters, and minimum parking requirements, you’re able to piece together your maximum density to minimum parking space ratio.
Each jurisdiction will have a separate set of requirements based on the zoning designation and types of units. Most communities will require one space for the for the first bedroom and a fraction of a space for each additional bedroom in a unit. Oftentimes municipalities will have provisions or overlays that will reduce or eliminate parking requirements within dense urban environments. Further there has been a recent shift to parking maximums as well, as municipalities work to create more green space and more walkable commutes.
Above and beyond zoning regulations, developers must be cognizant to provide enough accessible spaces to meet ADA accessibility requirements.
Try to build parking flexibility (such as shared parking and multi-purpose structures) into projects
For the most part, multifamily parking spaces do not need to be very structured. Covered parking may be enforced in the Zoning Ordinance, but that isn’t necessarily a bad feature to a prospective resident! Consideration should be given to designing parking layouts in a manner that should parking requirement be reduced in the future, that the space can be utilized to create additional units or amenities for residents. To ensure maximum flexibility for future use, don’t build parking garage structures that are strictly for parking use. This way you don’t lose structural adaptivity or space flexibility. Converting sloped parking ramps is much more difficult than repurposing parking decks. Be mindful of height clearances as well if you may be converting the structure.
You don’t often find overparked multifamily developments. If that is the case, it’s not a bad option to lease the spaces to a nearby property or consider adding more residential units!
We come across many projects that are developed with a parking variance. The variance typically will cost more up front and take longer to process, but if your lot cannot accommodate the minimum number of required parking spaces, you may have no other options. The local jurisdiction will likely require a parking study to determine how much to reduce the spaces by. Many zoning ordinances contain clauses for parking reduction provided a parking study is conducted.
Another option is to lease parking at an adjacent property that has an excess of space or has a parking demand that peaks during the day and is very low in the evenings. Again, the municipality will likely require a parking study and a long-term access agreement.
Converting lots for parking is particularly good use of properties that aren’t suitable for more complex development because of environmental contamination – Brownfields that need to be cleaned up, for example, or a former high-risk contamination site that the developer doesn’t fully want to invest in remediating, particularly if the contamination involves a risk of vapor intrusion.
Anticipate future needs and work with local officials to adapt to changes
America is growing, and metropolitan areas get denser by the minute. To accommodate higher populations, Planning Commissions take into account the city’s growth rate when updating the Zoning Ordinance. In doing so, you’ll find parking requirements are ever changing. The vehicle per household ratio from the 60’s or 70’s is very different from today. Many older multifamily developments do not have near the parking capacity for modern day households. Yet ride sharing services and the potential for autonomous vehicles have the potential to reduce vehicle ownership and parking demands.
To help guide you through the intricacies and complexities of integrating parking solutions, from zoning to feasibility, to ADA compliance, to the various physical and environmental due diligence assessments that these properties necessitate, ensure a successful transaction and future investment by relying on the expertise of an experienced, knowledgeable and multi-disciplinary consultants.