The way multifamily property owners price parking can significantly influence their net operating income (NOI). A recent report by storage and parking marketplace Neighbor highlights a striking discrepancy between parking prices at multifamily properties and commercial parking rates in major U.S. cities. By strategically revisiting parking pricing, investors can optimize their building operations, boost NOI, and add value to their properties without alienating tenants.
The Data on Parking Discrepancies
The report reveals substantial differences between the monthly costs of parking at multifamily properties and commercial lots. In Miami, for example, the average cost for uncovered multifamily parking is $20 per month, compared to $170.67 at commercial lots—a staggering 753% difference. Similarly, Phoenix’s covered parking shows a 435% disparity, with multifamily rates averaging $30.93 per month versus $165.39 for commercial parking.
Interestingly, Washington, D.C., is the only metro where multifamily parking costs exceed commercial rates, albeit modestly (5% higher for uncovered and 3% higher for covered lots). These findings suggest there is considerable untapped potential in many markets for multifamily owners to adjust parking pricing without exceeding competitive thresholds.
Revenue Opportunities Through Strategic Pricing
Neighbor estimates that a property in Los Angeles, where uncovered multifamily parking averages $61.33 per month and commercial parking is $169.56, could increase its annual NOI by up to $63,000 by pricing parking at 50% to 70% of the commercial market rate. This strategy balances increased revenue with tenant affordability, ensuring resident satisfaction is maintained.
Incorporating market data and a clear framework for parking optimization can also enhance property value over time. For instance, raising parking rates, when executed carefully, can directly impact a property's capitalization rate and overall valuation.
Best Practices for Optimizing Parking Revenue
To maximize NOI through parking strategies, multifamily investors should consider the following best practices:
Conduct Market Analysis: Start by assessing local commercial parking rates to identify gaps between multifamily and market pricing. For example, cities like Miami, Phoenix, and Denver have the most significant pricing disparities, presenting opportunities for targeted increases.
Understand Your Tenant Base: Before adjusting parking prices, evaluate tenant purchasing power and behavior. Consider factors such as:
○ Local income levels.
○ The ratio of parking costs to rent.
○ Availability of nearby public transit.
Raising parking fees too sharply in low-income areas or where public transit is abundant may result in tenant dissatisfaction or increased turnover.
Incremental Pricing Adjustments: Avoid abrupt, across-the-board parking price increases. Instead, gradually align parking fees closer to market rates. For instance, increase prices for new tenants while keeping existing tenants’ rates stable to minimize turnover. This approach also complies with local regulations that may limit mid-lease rent changes.
Enhance Parking Amenities: Adding value to parking spaces can justify higher fees. Consider:
○ Installing electric vehicle (EV) charging stations.
○ Providing covered or reserved spaces.
○ Offering additional security features like surveillance cameras.
According to the report, 42% of surveyed multifamily properties offer EV charging, but only 38% charge a fee for it. Introducing or optimizing EV charging infrastructure could open a new revenue stream, especially in cities with high EV adoption rates.
Utilize Technology: Implement parking management software to streamline billing and space allocation. Platforms like Neighbor or other property management tools can help track usage, monitor vacancy, and set dynamic pricing models.
Balancing Revenue Growth with Resident Retention
While increasing parking prices is an attractive way to boost NOI, investors must balance this with tenant retention. A few strategies to ensure a smooth transition include:
●Transparent Communication: Inform tenants about any parking fee changes well in advance, explaining the reasons behind the adjustment (e.g., market alignment, added amenities).
● Bundled Offers: Combine parking with other services, such as storage units or concierge options, to create value-added packages.
● Flexible Options: Offer tiered parking plans, such as reserved versus general spaces, to cater to different tenant needs and budgets.
The Role of Local Regulations
Investors should be mindful of local regulations when adjusting parking prices. In some cities, tenant protections or rent control laws may extend to parking fees, limiting mid-lease changes. By focusing on new leases or phased increases, property owners can stay compliant while implementing pricing strategies.
The Future of Multifamily Parking
As the multifamily market evolves, parking strategies will need to adapt. The rise of EV adoption, shifts toward remote work, and increased use of rideshare services could reduce parking demand in some areas while increasing the need for EV infrastructure in others. Monitoring these trends will help investors stay ahead of the curve.
Multifamily property owners often leave significant revenue on the table by underpricing parking spaces. By aligning parking fees with local market rates, enhancing amenities, and leveraging technology, investors can unlock hidden NOI potential. However, careful consideration of tenant needs and competitive dynamics is crucial to maintaining resident satisfaction and minimizing turnover. With a strategic approach, parking optimization can become a powerful tool for enhancing both short-term income and long-term property value.
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