How do you value properties with larger parking lots?
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[{"id": "g0hblxc", "text": "You would assess the parking needs of the building per market and figure out what is excess land, then figure out its value and add that in.  This could also involve a negative adjustment for a lack of parking.....", "replies": [{"id": "g0hecn9", "text": "Correct answer \\^\\^\\^\\^\\^\\^\\^\\^\\^\\^\\^\\^. I would only add that you can likely check city code for parking requirements for the type of building to assess if it meets the need.", "replies": [], "depth": 2}, {"id": "g0hjiay", "text": "Nothing worse than not enough parking. \n\nWell sure there is, but lack of parking suuuucks", "replies": [{"id": "g0hrsp7", "text": "I don't know what trader joe's formula is but it's about 20% off.", "replies": [{"id": "g0htowa", "text": "Except that is the secret to their ridiculous PSF sales numbers... they choose smaller locations with smaller lots (typically more urban with more turnover). They average sales per square foot that is 2x Whole Foods.\n\n [https://www.strongtowns.org/journal/2016/3/16/trader-joes](https://www.strongtowns.org/journal/2016/3/16/trader-joes)", "replies": [{"id": "g0hv1ly", "text": "I 100% don't doubt that it's part of their private equation.    Thanks for the link.", "replies": [], "depth": 5}, {"id": "g0lt6l5", "text": "IIRC Trader Joe's has like 1/10th the SKUs as Safeway.  If you don't sell 80 types of everything you won't need space for 80 types of everything.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "g0hr6mo", "text": "Agreed", "replies": [], "depth": 2}], "depth": 1}, {"id": "g0hc1zv", "text": "Generally more because it probably has more land area. But maybe its got too much parking for the building and is just an overimprovement and be worth very little. Or it could be excess land and be sold as an outparcel for a significant amount of money.", "replies": [], "depth": 1}, {"id": "g0hc6gv", "text": "You mention a cap rate so I'm assuming this is an income property. How much extra income can you get from the extra parking? Divide that by your cap rate and add $800k and there's your answer.", "replies": [], "depth": 1}, {"id": "g0hdv6x", "text": "What kind of property?  Retail and office are different than industrial etc.  Is parking in the market free?   What\u2019s the market parking ratio/sf for that property type?", "replies": [], "depth": 1}, {"id": "g0hestq", "text": "It could have a negative value because it is not needed and is just a lot of additional maintenance and security costs.", "replies": [], "depth": 1}, {"id": "g0hf0id", "text": "Based on per car basis. E.g. $1000/car etc.", "replies": [], "depth": 1}, {"id": "g0hjwpt", "text": "Totally depends on the individual case. We have a medical office building that you barely notice on an aerial view since the lot is mostly parking. We charge for parking, and let the adjacent hospital use our lot for a fee, but those income streams are relatively small since you can't charge medical patrons what you can charge a retail or hotel patron. A buyer with the horizon and the resources to put all those cars in a multilevel parking structure and build more office space will see more value than a less ambitious buyer who just wants to take over our owner/manager operation. Our own ambition has always been tempered by the cost of the parking structure, which is at least $35K/space.", "replies": [], "depth": 1}, {"id": "g0hqbsd", "text": "Same cap rate is same value.\n\nA bigger parking rate should either cause 1) rent to be higher so the same cap makes the value higher or 2) same rent because the smaller parking is adequate, but a lower cap rate because there\u2019s upside to increase the rentable area or density.", "replies": [], "depth": 1}, {"id": "g0hrov7", "text": "Depends on the buyers.  Cabellas had a guy that would install a museum and 'school' (or something like that) in each retail, and then prorate the parking spaces at a much lower tax rate.", "replies": [], "depth": 1}, {"id": "g0hy6h7", "text": "Location location location", "replies": [], "depth": 1}, {"id": "g0i3hmt", "text": "I've just gone through this on a few industrial properties.  (Sounds like you might be talking about retail or office, in which case this wouldn't apply as much.  In my case the extra \"parking\" is outdoor storage, which is of great use to many businesses.)\n\nSecure outdoor storage (fenced or whatever) in my market would rent for $1.50-$3.00 per s.f. per year.  So say you had 10,000 s.f. of \"extra\" space (after providing a reasonable amount of parking and accessways to the building), the lease should reflect something between $15,000 and $30,000 per year for use of that storage.  That storage may be leased to a different tenant entirely than the one in the building.  There are many variables.\n\nIf you used an 8% cap rate to extrapolate the property value:\n\n$15,000 / .08 = $187,500 in added value to that property, based on the 15k cash flow.  (What cap rate you apply depends on the property itself and the market in you area.  8% may be totally wrong for your area.)\n\nAnyway, relating back to your question, it totally depends on how useful that extra parking area is.  An extra 4,000 sf of parking which is not needed and can't be leased to anyone else to use adds little value.  It has to show up in the bottom line somehow in order to increase your property value significantly.\n\nThat said, I think more parking is definitely better than less parking.  Having more will certainly make it easier to find tenants and buyers for that building.  So there is a value there, but not as directly measurable as \"outdoor storage\" which can be fenced and leased to someone to use.", "replies": [], "depth": 1}, {"id": "g0lts01", "text": "In hotter areas 2ksf of covered parking can be more valuable than 6ksf of uncovered parking.  Nothing like your rear view mirrors falling off the windshield from the heat.  If the lot has solar panels that's a double win-more shade and lower electric bills.", "replies": [], "depth": 1}]