Inner-city carparks are becoming a highly sought after investment
KEY POINTS:
Prices for carparks are rocketing as developers and property owners start to feel a slight chill blowing through the commercial property sector.
As the apartment market, in particular, has melted, parking spaces are one of the top performers in a sector that is rapidly changing across the board.
For the price of a modest apartment, investors can buy five or six prime parking spaces. As a result, car-parks are becoming a highly sought-after investment. Colliers International's acknowledged carpark expert Roger Seavill has sold 300 CBD carparks worth about $12 million this year. He recently had an inquiry from an investor who had $200 million to spend on a carpark buying spree.
Seavill says the carpark market remains hot and prices for some Auckland inner-city parks have doubled in less than five years.
Seavill's biggest CBD carpark deal this year has been the sale of 160 carparks on the old AA site at 162 Victoria St West to TCLM Manson for $7.5 million. The property is opposite the NZ Post's Auckland sorting centre on Victoria St which Mansons bought last year. Both sites will be redeveloped.
Seavill sold 50 parks leased to BNZ at the Quay West annex building in Mills Lane for $39,500 each in 2003. The buyer changed the leases to market rent and Seavill then resold them individually for $49,500 each. On a monthly rental of $395, the net return equated to 8.1 per cent. Since then, some of the carparks have been sold again for prices starting from $60,000. In the most recent sale, four parks were sold by Seavill for $79,000 each, a net return of 5 per cent.
The rent has not changed in the past four years but the return has gone from 8.1 per cent to 5 per cent, symptomatic of yields falling a lot faster than rentals have risen. Carparks are well overdue for a rent rise.
The 5 per cent to 8 per cent return on carparks is better than many apartments, says Seavill.
If carpark investors need cash, and own several parks, they can sell one or two without having to liquidate their entire investment.
There are two main types of ownership for carparks. The first is in parking buildings where each space has its own strata title. Seavill says these are of the biggest interest to investors because they can be readily bought and sold.
Strata titled carparks operate much like apartment buildings in that each space is individually owned and the owners all have a share of the common area. Outgoings such as maintenance are met by the body corporate.
The second type is in office or apartment buildings which have some park space included in them. They are often on auxiliary titles attached to the main titles of individual apartments or office and need to be sold with the offices or apartments to which they are attached.
Not all parks are equal. A few hundred metres from Queen St can mean thousands of dollars in price difference. Seavill sold a carpark at 155-157 Queen St for $68,500, a return of 5 per cent, while 31 undercover carparks in a walled off, separately accessed part of the unit-titled Farmers Carpark on Hobson St were sold for $45,000 each, a return of about 6.5 per cent.
In the main part of the same carpark, Seavill sold 20 undercover and 10 rooftop parks for $35,000 each plus a further five undercover parks for $40,000 each. When the Farmers parks first went on sale in 1995 they fetched $17,500 each.
The biggest expenses a carpark owner faces are rates and body corporate fees. Seavill says average outgoings on an Auckland CBD carpark range between $400 and $1400 a year.
Rents range between $80 and $130 a week, giving investors a fairly healthy return. He says the rents are cheap when compared with other cities. Sydney CBD businesses are paying some of the highest carpark charges in the world, with some basement parks costing more than A$1000 ($1133) a month. Only in London and Tokyo does monthly parking base rate plus levies and GST cost more than in Sydney.
Colliers International has published its seventh annual global Parking Rate Survey, which estimates that monthly parking in Sydney's prime financial district is now more expensive than New York, Hong Kong or Paris. In London, buying a lease on a permanent carpark can cost as much as A$325,000 ($368,108).
Colliers senior vice-president research Ian Moore says parking costs have increased globally for the fourth year in a row, mirroring rising demand and a dearth of supply.
Seavill says Auckland carparks are low maintenance, the returns are good and there's every indication there will be continuing good capital gains because there are so few around.
There wouldn't be more than 10 sites in the Auckland CBD with individual carpark titles. Auckland City Council's policy is to constrain the supply of long-term parking at existing levels to cut the amount of traffic coming into the CBD which will make carparks even more valuable.
The New South Wales Government and the Melbourne City Council have introduced parking levies. Sydney commuters pay A$930 ($1053) a space a year and, in Melbourne, the city is embroiled in a bitter debate over the A$800 ($906) a year parking levy.
Supply is also tightening up in Sydney.
The city's Local Environment Plan is explicit about discouraging commuter carparking by limiting the development of tenant and public parking facilities.
It is also putting in place a scheme for companies to lease cars on an hourly basis known as car share companies to occupy council parking lots.
