Asset Class: Car Parks

Car parks are coming to the fore as a potential asset class, although still a niche product. Europe has about 300 million public parking spaces and 48,000 multi-storey car parks. But the market is highly fragmented, with a huge range of different providers. Still, a recent study by Catella suggests that two aspects of multi-storey car parks are beginning to appeal to investors – cash flow and appreciation potential. Average yields at the moment in Europe are around 6.5%.

According to Catella, the multi-storey car park market in Europe is about 48,000 properties, of which 40% are operated by municipalities or e.g. shopping centres, 30% are associated with the entertainment industry such as theatres and cinemas, and 10% are at airports. The remaining 20% are for more mixed use.

The total turnover in Europe in 2015 in the sector is put at €8.58bn in 2015. Germany has a 25% markets share, followed by France (17%), the UK (16%), Italy (15%) and Spain (8%). Proportionally, on an inhabitant basis, the Nordic countries have the highest proportion of off-street parking with 9.82% in Sweden and 8.25% in Finland – well ahead of the European average of 5.4%. The proportion in Germany is 6%.

With increasing urbanisation, and with most of Europe’s larger cities predicting population growth by 2010, a growing number of automobiles are facing shrinking on-street parking and an increase in paid-for and managed parking.

Martin Eberhardt, CEO of Bouwfonds IM Germany, whose company has now got nearly €800m invested in car park funds, sees developments in digitalisation over the next ten years providing a spur to growth.

Additionally he says that, “the growing popularity of car-sharing in metropolitan areas means an increase in the mix of transportation mediums, resulting in more rather than fewer vehicles in use, which in turn means an increased demand for parking spaces.”

The sector is facing a number of new financial challenges. According to Sascha Stabenow, Senior Project Developer at ARCADIA Investment Group, “the costs for the basic structure of car parks has risen only moderately in the last years. The costs for equipping however have grown considerably and will likely continue to do so because of the greater requirements for car park technology and equipment as well as the need to take the trends in electro mobility into account.”

In Germany fully-automated car parks are already in operation, which means a car is driven into a container and then automatically moved to its final parking space. Rolf Nicodemus, Project Vice President at Connected Parking at Robert Bosch GmbH, believes that automatic parking will increase parking occupation in car parks by 20%. In Stabenow’s view, however, fully automated car parks will remain a niche given their high investment cost. At the very most they will serve as in-fill developments in highly built-up urban areas. “In the coming years revitalization of existing car parks will be our main focus rather than in building new ones, particularly in western Germany where many car parks built in the 60’s and 70’s have reached the limit of their operational lives,” he added.

While this may be true, a recent study shows that eventually investing in more technically advanced car parks could prove profitable as well. The study, carried out by Duale Hochschule Baden Wüttenberg (DHBW) on 1000 participants, found that 50% of participants asked would be willing to pay more to have a reserved space. 41% would pay extra to be able to park closer to their destination. Almost 30% would be willing to pay more for a secure and adequately sized parking space and about 25% for a better overview of available parking space. The researchers in this study recommend that future development in parking should focus on convenience above all, and that digital technology should be a key component in this area.

A driver could, for example, reserve a parking space while planning their route on their navigation system, thereby reducing the otherwise typical driving stress which over 50 % in the study experience while searching for a parking space.

Increased use of hybrids and electric cars will also change the way we drive in the future, according to Philippe Op de Beeck, the CEO of Stuttgart-based APCOA in a recent conversation with REFIRE. Up to a third of the cars now sold in Norway are electric, and restricting fuel engine cars starting in 2025 is being seriously considered in both the Netherlands and Norway. Car parks will then also function as charging stations.

APCOA is the leading parking facility operator in Europe. CEO Op de Beeck says APCOA works closely with the cities and municipalities where it operates, as the future will see only a rise in the amount of paid parking in built-up areas, albeit with increasing differentiated price models. Despite car sharing and other flexible models, the amount of cars seeking urban parking is still rising, with 45.1m cars in Germany in Januarey 2016, a rise of 1.5% over last year. In fact, new car-sharing business models lead to more movement, with 21% more new customer registrations in Germany last year. Electrical cars saw a rise of 45% in 2015 to 12,300 – all of which need special loading stations, which parking houses can provide.

We will be returning to some of the facts and figures behind the attractions of car park investment in an upcoming issue of REFIRE.