How much is a parking space worth?
Life is a journey, but don’t worry, you will find a parking spot at the end.
—Isaac Asimov
If you follow my blogs, you know that I am living a bi-coastal existence. As the co-owner with my wife of a single-family home in suburban Washington, DC area and two condos in Seattle, WA, over the years I have been interested in a variety of real estate subjects. As I pour over real estate websites, I have explored issues like how much extra are 12-foot ceilings worth; or what is the value of a 2,000 square foot patio in the city center; or what is an unobstructed water view of Lake Union in Seattle worth; or how to value moorage for a small boat on Lake Union. These are unusual real estate questions, and even the internet provides little guidance. There is no science per se or formula to answer these kinds of somewhat intangible questions, and the appraisal industry usually assigns rather nominal value to these kinds of factors, while the marketplace tends to give them much more importance.
Just today I was asked how to value a townhome with a 2-car garage and 2 tandem parking spaces in the driveway, in an urban part of Seattle, with little available street parking. The townhome owner quite reasonably thinks the four parking spaces, which are very unusual in the urban village he resides in, are worth more money than the nominal sum for just having a garage that the appraiser has assigned.
One way to value spaces is to go look on the MLS or elsewhere and see what they sell for. The problem is that most of the sales are downtown, and they are few and far apart. But parking spaces do list for sale for up to $50,000 in Seattle. In Chicago and New York City they even list for much more. When buying my Seattle Lake Union condo, I arrived at a back of the envelope valuation of $25,000 for each of my two parking spaces, but I would not call the process I engaged in as very scientific.
And looking at the downtown Washington, DC condo market, I have seen professional if dated analysis from 2013 that says parking spaces range from $25,000 to $92,000, with a median sale price of $36,000. Interestingly, the same 2013 report says that it cost new condo developers $35,000 to build parking spaces, and presumably that cost has escalated considerably a dozen years later. From my own anecdotal review of the MLS over the years, I have seen resale parking seems to go for around $45,000 in downtown Washington, DC, and new developers try to get even more. Clearly, the value goes down the further away from the city center you go as the public street parking rat race becomes less problematic. And it was my sense that the pandemic knocked some of the legs out of the downtown DC market as work from home reduced parking demands by commuters.
Another way to value property is to look to see what it would rent for and how much income it could produce. Of course, the townhome owner cannot subdivide his property or sell his garage, but there is a market to lease these parking spaces and garages, so it is possible to value these items on a cash flow basis. Landlords have different expectations about levels of return on their investments, but an 8% cap rate (annual net income before interest/purchase price) is probably reasonable. Let’s assume the townhome owner could rent one-bay of his 2-car garage (and the less valuable tandem driveway spot) for $200 a month, net after expenses. At that rate, the combined garage and tandem parking spots are worth $30,000 (30,000 x 0.08 = $2,400/year or 200/month after taxes, insurance, vacancy allowance, maintenance, HOA fees, etc. ). Remember that the inquiry I fielded involved a 2-bay garage, so double that valuation to $60,000.
Assessing the value of a parking space involves considering various factors such as location, size, and the potential revenue it can generate. Conventional real estate appraisers will tell you to think about the following factors:
• Market Revenue: In areas with a constrained street parking supply, the value of a parking space may be based on its ability to generate market revenue.
• Cost to Construct: In areas with little rental parking supply, the value could be based on the cost of building structured parking.
• Construction Materials: The materials used in constructing the parking space can significantly impact its value. High-quality materials like metal or premium wood can enhance durability and aesthetic appeal. A private garage bay is worth more than a public garage.
• Zoning Compliance: Local zoning codes may require a minimum number of parking spaces per unit, which can affect the value of the space.
• Appraisal Approach: Different approaches to appraisal, such as the sales comparison approach or income capitalization approach, may be used to value the parking space.
Of course, the cliché is that all real estate is local. There is no controlling rule of thumb. Valuation io an art, not a science. And the true determinant of value is what a willing buyer will pay.