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The (Smaller) Big Apple

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The Unthinkable Happens

There are a few sure things in life. The sun comes up in the east and sets in the west. Summer is hotter than winter. And the Buffalo Bills will never win a Super Bowl. Beyond that, everything else is kind of up in the air. But one of the bedrock truisms of our lifetimes is unravelling right before our eyes: it’s now easy to get a parking space in New York. This may not be as monumental as finding out that there is life on another planet, but it’s pretty close. And the sudden availability of ample parking in Manhattan is going to reverberate in the real estate world for decades.

Parking is tight in many cities, of course, but in New York the lack of spaces is legendary. People have been known to wait years for the privilege of spending hundreds, or even thousands, of dollars a month for a place to put their car. There are a lot of historical reasons for this, but the major one is that, with the exception of NYC, few cities around the world have adopted the skyscraper model as the standard for urban development. As a result, there are more people per square foot working and living in New York than in any other city in North America. And with Manhattan landlocked from three sides, there is nowhere to go but up.

A Shifting Landscape

To make matters worse, many of the older Manhattan skyscrapers, including the Empire State building and the Chrysler building, were built with very few underground parking spaces. Needless to say, the combination of more employees and fewer spaces has compounded the problem to the point where the laws of supply and demand were clearly tipped in favor of parking lot owners.

Then COVID happened, and the rules changed. According to the Wall Street Journal, there are tens of thousands of empty parking spaces in New York for the first time since the invention of the gas-powered car. There have always been seasonal fluctuations, of course. Summer allows for more people to walk and take transit, whereas the bitter, cold winters force people into their cars. But the current trend seems to be more serious than the usual ups and downs – and it may become permanent. That’s because thousands of New Yorkers are not only staying home because of the pandemic, they are actually planning on permanently leaving the city. When it comes to seismic shifts in the parking industry, this may be the biggest we have ever seen.

Rethinking Parking in Manhattan

For the first time, parking facility operators in Manhattan need to think differently – and quickly. For decades, owning a parking lot was essentially a permit to print money… and keep printing it each month as rents soared to the point where an average parking space in Midtown cost around $430 a month. Thanks to COVID, that inexhaustible stream of parkers no longer exists, and operators need to find new ways to fill up their lots.

The obvious answer is to lower the cost of parking, but that doesn’t solve the whole problem. Instead, they need to explore creative new ways to attract and retain drivers who still work out of their Manhattan offices. Because parking lot operators have had the upper hand for decades, they haven’t had to innovate. They were always at an advantage because there were more cars than spaces. Now that the numbers have flipped, they no longer have the luxury of charging maximum dollars for spaces and expecting the best possible return on investment. This is where flexibility is absolutely essential.

Innovating Parking Solutions

So what does this creativity and innovation look like in the real world? For starters, parking lot operators need to realize that even people who are still coming to their offices may not be going to work every day. Charging $500 a month might make sense for people who are working five days a week, but no one is going to pay that kind of money if they are only coming into the office twice a week. Manhattan garages have been notoriously strict about things like sharing spaces, but the new reality practically requires it. By allowing for multiple renters on a single parking spot, parkers have the flexibility they need when renting spaces and parking space owners can still get great returns.

The reality is that the world is changing – and we don’t know if or when it will return to the old way. The old practices and attitudes that worked so well in the past simply won’t work anymore. Parking needs to innovate to meet these new demands. It’s basic math.

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