In a world where ride services such as Uber and Lyft have become widespread, and electric cars are becoming extremely popular, many are asking themselves what that means for parking lots going into the future. In the past, office and retail tenants relied on serious negotiations and a series of analyses to figure out acceptable parking ratios for their stores and offices. But can we expect the same parking concerns from commercial real estate tenants in the future, or will their focus shift to other interests such as charging stations and drop-off/pick-up zones?
Parking ratios are generally established by local zoning codes. The parking ratio is a statistic commonly used to determine the number of parking spaces available for use by each commercial tenant. The total parking spaces available are divided by the property’s entire gross leasable area, with the ratio most commonly expressed per every 1,000 sq. ft. of property.
Most retail stores require four spaces per 1,000 sq. ft., while restaurants are typically allocated more parking spaces for every 1,000 sq. ft. These numbers can vary depending on the property type.
Besides ensuring that the correct number of parking spots are assigned, big box stores like Marshalls, Old Navy, Best Buy, and grocery stores such as Publix, serving as anchor stores, also require specific parking fields in front of their stores and demand certain parking ratio minimums. It is not uncommon for these tenants to designate protected parking areas, prohibiting landlords from ever changing, rearranging or reassigning their parking spaces, and to maintain architectural control over their parking areas.
More often than not, these leases have base terms that range in the 10- to 20-year timespan with extension rights that can last 25 to 40 years. Because of the importance surrounding the number of parking spaces available, many developers responded by increasing the number of parking spaces in their developments, thus increasing tenants’ overall parking ratios.
While this was an important factor in the leases of the past, recent innovations like robotic garages and self-driving cars have given us a glimpse into the future. Also, the explosion of applications such as Uber and Lyft, and the promise of many U.S. auto manufacturers to transition their cars into electric vehicles as early as 2025 will likely mark the end of the wide-open parking lots we have come to know.
Though it will likely take years before the full impact of some of these new technologies unfolds, developers need to take notice of how much control they are giving away to tenants over their parking fields; developing properties that already incorporate electric vehicle charging stations and pick-up/drop-off zones; and building language into long-term leases that allows for flexibility for the landlord to modify the parking areas so as to provide for the construction of charging stations and the inclusion of these costs as operating expenses that can then be passed on to tenants.
What we have yet to see is what trends these changes will cause with respect to tenant demands. Will tenants want electric vehicle charging stations to become the new protected parking area? Or will they demand a reduction in their parking ratio in exchange for more lucrative curb space to designate Uber/Lyft zones closer to their stores? No one really knows.
Though we now have more questions than answers, commercial real estate players should start planning for a potential driverless (or shall we say, a less individually driven) future, together with the need for electric charging stations, before ceding total control of their parking fields for the next fifty years to their anchor tenants.
Interested in this topic? Stay tuned for an article about how the novel coronavirus may have caused a regression in the reshaping of parking lots. Also, be sure to enter your email address in the subscription box on the right to automatically receive all our future articles.