Following the unsurprising slump in the office market in response to the EU referendum, we’ve seen welcome signs of stabilisation - and enjoyed an encouraging start to 2017 with domestic buyers returning to the market.
However, this cautiously positive picture is misleading. Brexit remains rather a black box, and finance firms and other big businesses could still relocate to European pastures new if their trading terms are disrupted.
Whilst our political future is yet to be determined, appetite for long-term leases will be weakened - and landlords may be forced to lower rents and extend rent-free periods to incentivise occupiers seeking less risk and more flexibility.
Although recovery is hopefully somewhere on the horizon, office owners should start searching for ways to diversify revenue streams and squeeze additional value from their properties.
One asset which can drive immense value is often overlooked - the car park. There’s a wealth of parking potential which remains untapped across the commercial property sector, and underutilised office car parks are a prime example. Parking is a global market worth over £50bn - and with an increasing number of cars on the road, demand for it couldn’t be higher.
Parking assets are much more resilient to economic ups-and-downs than real estate. With predictable demand, they can be relied upon to deliver steady returns - and lucrative ones at that. Car parks attached to offices are therefore becoming a very attractive opportunity in this current climate - offering a complementary income alongside primary revenue streams, and helping to offset lost rental incomes if offices are vacant, only partly let or being refurbished.
|No. of parking spaces
|City of London
|London (zones 1-2)
For example, a City of London office with 50 parking spaces can generate around £300,000 annually. In this case, when managed properly, the car park could add over £3m to the value of the property. Even if spaces are only available outside of work hours, there is still money to be made as office car parks are often ideally located for people coming into town on evenings and at weekends. Assuming 50 parking spaces open to the paying public at only these times, a City office can comfortably make over £40,000 of additional income per year.
Commercialising a car park
Thanks to the technology and data available today, commercialising a car park is quick, easy and incredibly cost-effective. On-site technology allows you to automate the majority of a car park’s operations, cutting traditional running costs by around 70%; mobile apps open up a larger audience to which to market your car park; and data provides scope for real-time price alterations in response to demand - which can boost your revenues by as much as 100%.
JustPark specialise in maximising value from underused parking spaces in this way. In the past 12 months, we’ve added over 10,000 new locations - with many of these at commercial properties. Opening up underused space for paid parking unlocks valuable ancillary revenue and can help to keep returns ticking over whilst land lies unoccupied or under development.
Alternative opportunities have become more popular in recent years and are especially relevant in times of uncertainty. Car parks offer a particularly reliable option, and technology makes it possible to access this market with minimal effort or investment - creating a profit-producing asset from spare space, and offering an easy win for landlords looking to diversify their revenue streams.
Anthony Eskinazi - founder and CEO of JustPark