Ancillary income sources like parking can contribute up to 10% to revenue for multifamily operators, however many property owners overlook parking as a revenue driver and often underprice it compared with market rates. As multifamily faces increasing operating costs, revenue sources like parking can be critical, according to Neighbor Storage Inc.’s multifamily parking intelligence report.
Neighbor studied 10 US markets to evaluate pricing for parking. In eight of those markets, the market rate for parking was an average of 162% higher than the multifamily rate for covered parking. This gap represents an opportunity of $47,000 to $189,000 in NOI per property per year if operators optimize their prices, the report said.
To boost NOI and maximize parking revenue, property owners should consider setting parking prices at roughly between 8% and 20% of total rent costs. However, Neighbor cautioned that overpriced resident parking may dissuade prospective new tenants and prompt expiring tenants to seek a new property. Property owners should take into account how much other multifamily operators are charging for parking as well as how much commercial parking operators are charging when setting rates.
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Across all 10 markets sampled, covered parking is charged at a higher rate than uncovered parking. However, uncovered parking is more expensive on average than covered parking in markets like New York, San Francisco and San Diego, according to the report. This unexpected result could be attributed to higher surface maintenance costs, higher property taxes and fewer tax breaks for uncovered lots.
Sixty-four percent of properties in the 10 markets studied offered both covered and uncovered parking. About one-third of properties offer at least one form of free parking to residents and about 15% don’t charge residents for their first parking space. Some properties offered bundled parking rates for residents with more than one vehicle.
The cost of covered parking was the highest in New York, Washington, D.C., and San Francisco. Neighbor said resident parking rates generally correlate with cost of living for covered parking.
In addition, the report found that assigned parking is generally charged at a higher rate than unassigned parking, capitalizing on the perception that guaranteed parking is a desirable amenity. Uncovered assigned spaces are generally charged at higher rates than uncovered unassigned spaces. However, assigned covered spaces are actually cheaper on average than unassigned covered parking spaces.
“This unexpected behavior indicates yet another opportunity for property owners/managers to optimize their pricing structures,” the report said. “Assuming that assigned parking is a coveted amenity among tenants, property owners/managers can adjust their pricing structures according to each parking type’s unique value.”
In addition, the report found 42% of properties offer some form of EV charging, either communal or reserved stations. Of those, 38% charge residents a monthly fee to rent a private EV parking space and 36% said residents have to pay a third-party fee for EV charging but the property does not charge. Thirteen percent said EV charging is free for residents.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
