Daily Subsidy per Car, U.S. Offices with Free Surface Parking

Calculations to assist analysis of TDM programs (5/19/08)

 

1. For Hacienda Business Park in the expensive San Francisco Bay Area, the daily subsidy per car may be $7.59, by one calculation.  Calculation details are provided in #3 below. 

 

If a city allows unused surface parking spaces to be re-developed into new buildings, then effective TDM programs could reduce parking demand and unleash hidden real-estate gains.  The ability to bring about such gains would increase the value of the daily subsidy because the opportunity cost of having unused surface parking would be large.  Via this method, the daily subsidy per car could top $20. 

 

For companies where the office real-estate requires parking structures, the daily subsidy is closer to $20 per day per car parked, according to one Bay Area employer. 

 

2. In VTPI's Transportation Cost and Benefit Analysis - Updated December 2006, Section 5.4 provides 20 pages covering many different parking costs: http://www.vtpi.org/tca/tca0504.pdf

 

Table 5.4-7 shows a maximum monthly amortized surface parking space cost of $119 with an average of $68 (given in 1997 dollars).  With 23 working days per month, this translates into daily subsidies of $5.17 and $2.96, respectively. 

 

3. Details on the Hacienda daily subsidy calculation:

 

The monthly cost per parking space is based on maintenance costs and on real-estate value.

 

Maintenance costs: According to Eno Foundation's book entitled Parking (and according to VTPI), annual operations and maintenance cost per parking space is roughly $300 per year, or $25 per month.

 

Real-estate value. 

When offices are built, surface parking is built alongside to accommodate cars. For construction costs, buildings cost much more to build than does surface parking (very roughly $200 versus $15 per sf).  For land acquisition costs, the land value is the same whether the land receives a building or parking (very roughly $3M per acre or $70 per sf). So, for a monthly lease for office space, how much of the cost should be attributed to the parking?  Via a land and construction costs allocation, parking takes roughly 20% of overall costs.   

 

I assume:

  • 325 square feet per parking space (includes parking lot access roads and landscaping)

  • Near-full occupancy of the parking lot, or one parking space per car.  [Assuming full occupancy will understate the cost of a parking space.  Richard Willson's studies have shown 50% or more of office surface parking spaces go unused.  The most accurate calculation will be: lease cost * percent allocated to parking * square feet per car at that particular location.  If 50% of parking spaces are unused, then the square feet of parking per car is 325 sf * 150%. ]

At Hacienda, the monthly office lease cost is about $2.30 per square foot, so the monthly cost for a 325 square foot parking space is $149.50 ($2.30 per square foot * 20% * 325 square feet). 

 

Hence the total monthly cost per parking space is maintenance plus real-estate value = $25 + $149.50 = $174.50.

 

Daily subsidy per car

For the daily subsidy per car, there are about 23 working days per month, so the daily subsidy is $174.50/23 = $7.59. 

4. Comments from Jeff Tumlin, Principal, Nelson Nygaard Associates:

 

There are a broad variety of ways to calculate the “cost” or “price” or “value” of parking, depending upon how you define each term. Your number is within the right ballpark, but the formula erroneously assumes that all square footage is created equal. The cost and value of parking are very different from office space. A more accurate approach toward cost would be to look at amortized land value + capital costs plus annual operating costs for parking. The market value of parking, however, is also relevant but generally much lower – that is, how much is a tenant willing to pay for parking, given the choice? And the value varies along a curve; that is, when parking is oversupplied the value per marginal space is zero, and when parking is undersupplied it is very high.

In a high land value location like Hacienda, the cost of parking would likely run around $20 a day, assuming the developer could do something else with the land if it were not needed for parking. Low allowable FARs [floor area ratios - the amount of buildable office space per acre], however, significantly devalue land once a building is put up on it. One could argue that the land value underneath a Hacienda parking lot is zero – or negative -- in which case the cost drops to around $1 a day, covering maintenance, utilities, insurance and other minor operating costs.
 

5. Thanks very much for expertise from James Paxson, Genl Mgr, Hacienda Business Park Owners Association