PHOTO: Parking money in an alternative investment angle can have its benefits.
PUBLISHED WITH PERMISSION – API MAGAZINE
Parking your money has never had so literal a connotation as this investment alternative.
As workers return to head offices in capital cities around the country, car parks have emerged as a viable commercial property investment option.
Leading cash flow and commercial property specialist Helen Tarrant said that trends point to an almost 100 per cent return to the office in metropolitan CBDs by 2023, ensuring one of the most affordable and potentially profitable investments on offer is in car parking spots and blocks.
“I think definitely within 12 months we can be expecting almost all businesses that are operating out of the CBD will have some kind of program for people who want to be coming back to the CBD,” MS Tarrant, founder of Unikorn Commercial Property, told API Magazine.
“If, for example businesses don’t want their staff coming back full-time, they’ll have a mandate about staff coming back four days a week, or three days a week.
They’ll still be back at full capacity; it’s just they’ll probably have rotational staff.”
A return to work, however, doesn’t automatically herald a return to public transport usage.
“After covid, some people are now actually driving a lot more because they don’t want to be on public transport and expose themselves.
“When SARS emerged in China, nobody anticipated that the motor industry would explode.
“Almost every household that would not normally buy a car went out and bought one.
“That increased cars on the road by a factor of ten and they had all this traffic congestion because they didn’t anticipate so many more people would be on the road.
“We’re seeing that even now — when we look at traffic into the Sydney CBD at 4.30pm we’re seeing congested traffic and we’re not even back at full capacity yet,” Ms Tarrant said.
Return to work
Property Council of Australia occupancy data shows in April this year, Sydney CDB occupancy is at just 42 per cent, up from 4 per cent in September last year, Melbourne is at 36 per cent, Canberra 39 per cent, Perth 50 per cent, Brisbane 51 per cent and Adelaide 59 per cent.
A scarcity of car spaces drives interest and prices upwards.
“When a client buys a retail shop or an office space, they normally don’t know what to do with the car space.
“We encourage our clients who have excess parking to lease it out, which can add $10,000 to $12,000 dollars to their bottom line because they’re not paying for the car space.
“A lot of owners will rent out to another tenant in their building, tell the strata about it or put it on a noticeboard.
“Real estate agents know what’s available.
“They might have a tenant who needs six car spaces, but the property they’ve bought might only come with four, so the agents will actively go out and find that extra two.”
Car spaces also offer an opportunity for people to get started in the commercial property sector.
“They want something that’s different, so they invest in car spaces that literally have no barrier of entry because you can start with something that’s about $40,000, but then you can also go to $130,000, $140,000 for a car space that is quite central in Sydney.”
Alternatively, buying the car space to use for yourself can, over time, save money.
“If you go to Wilsons and rent out a car space, it’s somewhere between $300 to $500 a month.
“So, a car space you own will probably rent out between $600 and $700 a month, and you can rent it to yourself.
“Instead of putting that money in the bank you can leverage that a little bit,” Ms Tarrant said.
“If someone decides they want to buy a car space, one of the things to look at is to compare leasing, including how fast a space gets leased.
“Something in central Sydney would be more expensive than if you buy in the Homebush area for example, so you just have to decide if you want to pay a premium for that.”
A 15 square metre car space in Potts Point, for example, sold for $105,000 this month.
Leasing listing technology
Live leasing rate data can be seen on parking marketplace apps like Parkhound and Spacer, which show available pre-booked rentable car spaces in real time – and comparative information for prospective investors – across NSW, Victoria, the ACT, WA, SA and Tasmania, plus monthly lease values.
A secured underground, seven square metre, parking space in Sussex Street central Sydney, for example, is charging $1,000 per month. On Murray Street in central Perth, undercover parking is available for $688 per month.
“Let’s say too, that someone buys an apartment but it comes with a car space that includes its own title and it can be sold through a private sale. Wilsons will sell because they might have been part of a build, or part of the original build where a car space is located.”
Something a car space won’t be offering however is a very high yield.
“Unfortunately, I don’t have good news for you — it’s not going to be 6, 7 or 8 per cent in the city.
“The yield in Clarence Street, Sydney is about 4 per cent — it’s not great, but it depends on where that money’s going.
“It’s barrier-free entry and car spaces are quite easy to on-sell.”
“You do have to pay a strata fee and rates, but there is literally no maintenance,” Ms Tarrant said.