Determining the parking ratio for a commercial property project isn’t complex arithmetic. The number of parking spaces per 1,000 square feet of gross rentable space is the parking ratio. Sometimes a property’s type calls for a minimum number of spaces, sometimes local zoning regulations call for a minimum. But these minimums are getting a second look in the near future as driving becomes less popular and cities stress walkable development.
A University of California study on parking in 2011 found that the US sports over 800 million parking spaces, taking up 25,000 square miles of land, or about the equivalent of the entire land area of West Virginia — or four New Jerseys.
With a commitment like that, it’s a fact that a huge amount of value is locked up in parking lots. And now, cities across the US and the world are rethinking the level of commitment to parking.
The Guardian’s recent piece “Lots to lose: how cities around the world are eliminating car parks” takes a drive around the issue, looking for a future less committed to yellow painted lines on asphalt and more committed to green — both the sustainable and the folding kind.
As cities across the world begin to prioritise walkable urban development and the type of city living that does not require a car for every trip, city officials are beginning to move away from blanket policies of providing abundant parking. Many are adjusting zoning rules that require certain minimum amounts of parking for specific types of development. Others are tweaking prices to discourage driving as a default when other options are available. Some are even actively preventing new parking spaces from being built.
To better understand how much parking they have and how much they can afford to lose, transportation officials in San Francisco in 2010 released the results of what’s believed to be the first citywide census of parking spaces. They counted every publicly accessible parking space in the city, including lots, garages, and free and metered street parking. They found that the city had441,541 spaces, and more than half of them are free, on-street spaces.
Knowing the parking inventory has made it easier for the city to pursue public space improvements such as adding bike lanes or parklets, using the data to quell inevitable neighbourhood concerns about parking loss. “We can show that removing 20 spaces can just equate to removing 0.1% of the parking spaces within walking distance of a location,” says Steph Nelson of the SFMTA.
The data helps planners to understand when new developments actually need to provide parking spaces and when the available inventory is sufficient. More often, the data shows that the city can’t build its way out of a parking shortage – whether it’s perceived or real – and that the answers lie in alternative transportation options.
Getting Demand Right
Using dynamic pricing, San Francisco managed to reduce the demand for parking by nearly half. But sometimes demand falls without changing pricing, as in Philadelphia:
Since 1990, the city of Philadelphia has conducted an inventory of parking every five years in the downtown Center City neighbourhood, counting publicly accessible parking spaces and analysing occupancy rates in facilities with 30 or more spaces. Because of plentiful transit options, a walkable environment and a high downtown residential population, Philadelphia is finding that it needs less parking. Between 2010 and 2015, the amount of off-street parking around downtown shrank by about 3,000 spaces, a 7% reduction. Most of that is tied to the replacement of surface lots with new development, according to Mason Austin, a planner at the Philadelphia City Planning Commission and co-author of the most recent parking inventory.
What becomes plain as more cities line up to improve infrastructure and walkability, or use technology to re-jigger pricing as demand fluctuates: parking as we’ve known it — and priced it — is nearing the end of its era. Fixed minimums or quotas may lag behind the new reality, but developers and property owners will need to stay vigilant as old, reliable parking ratios no longer find space in reality.
(Photo credit: Wikipedia)
Major metropolitan areas are making an effort to distance themselves from the traditional food supply chain. Cities, dreaming of achieving food independence from the farms that surround them, are increasingly turning to vertical farming projects that grow food in urban settings. Thanks to giant advances in green engineering and sustainable agricultural technologies, these vertical farms are gaining industrial scale efficiency.
Marking this progress is news that Target stores will debut vertical farms inside some of their stores this spring. According to Business Insider, the big box retailer will add vertical farms to some of its stores this spring. Customers will be able to pick their own leafy greens — or have store staff take on the task. From the piece in Business Insider:
In January, Target launched the Food + Future CoLab, a collaboration with design firm Ideo and the MIT Media Lab. One area of the team’s research focuses on vertical farming, and Greg Shewmaker, one of Target’s entrepreneurs-in-residence at the CoLab, says they are planning to test the technology in a few Target stores to see how involved customers actually want to be with their food.
“The idea is that by next spring, we’ll have in-store growing environments,” he says.
During the in-store trials, people could potentially harvest their own produce from the vertical farms, or just watch as staff members pick greens and veggies to stock on the shelves.
Most vertical farms grow leafy greens, but the CoLab researchers are trying to figure out how to cultivate other crops as well.
“Because it’s MIT, they have access to some of these seed banks around the world,” Shewmaker says, “so we’re playing with ancient varietals of different things, like tomatoes that haven’t been grown in over a century, different kinds of peppers, things like that, just to see if it’s possible.”
Space And Indoor Agriculture
Does your property portfolio include a potential vertical farm? For ideas on vertical farming space configurations, these concept videos from architects help to visualize indoor farming on a profitable scale. To overcome the big spread between cost of land in urban vs. rural areas, most vertical farming has to emphasize the vertical and get more yield per ground square foot than traditional dirt. In the case of a big box or supermarket devoting a portion of its footprint to vertical farming, that requirement might not apply, suggesting there’s a market developing for modular indoor farming operations that insert smoothly into traditional food retailing floor plans. If you’re aware of developments in this area, leave a comment and let’s both keep an eye on this technology.
Commercial development without skilled construction workers is a recipe for no development whatsoever. Yet the country’s educational system appears to be failing the construction industry – along with commercial real estate.
The system seems content to allow millions of students at for-profit colleges to be simply fleeced and abandoned, no more employable than they were before going into debt for their education. This is the for-profit education industry’s choice: a grab for the short-term, subsidized buck over the long-term benefit to the student and to the country. Rather than orient itself toward trade education that actually meets the demands of the wider economy, the secondary educational system’s choice to turn away from the trades appears to have placed it on a direct collision course with the needs of the commercial development industry. Those needs are near all-time highs: the latest employment forecasts from the US Department of Labor say that the national need for these workers ranks higher than the needs for workers in all other categories save one (heath care).
Programs To Patch The Gap
Correcting the course isn’t going to be automatic, or even easy. Construction mogul Bill Gilbane’s piece in Commercial Observer highlights the gap between industry needs and trade education by talking up investing in programs that address high school students in the funnel for careers in construction and design. Gilbane sings the praises of the Ace Mentor Program, an afterschool program that brings high schoolers into careers in architecture, construction management, engineering and other disciplines.
Beyond programs like Ace, development and real estate firms have opportunities to address the issue on their own. As Gilbane writes about his company’s internal efforts:
But we must still do more to bring young people onboard and keep them long term. In order to meet future demand, we need to develop the pool of workers in our industry now. Developing the skills of younger professionals helps create our leaders of the future.
That is why we launched a two-year Management Candidate Acceleration Program (MCAP). The MCAP program allows younger employees to gain first-hand experience in each department at Gilbane Building Company and once they’ve completed the program, participants are prepared to step up into those roles full time—and their paths often lead to project or executive management.
This is essential to ensuring current young professionals become our next generation of leaders. It also supports our long-term employees on a path to continuous improvement. By providing technical and educational programs, we help our staff learn new skills to support their current roles and develop their leadership abilities.
These educational and mentoring models — both external and internal — are worth looking at, throughout the commercial real estate and construction industries as the economy surges forward. Let’s not let “business as usual” today serve to shut down huge business and employment opportunities in the future.Related articles
When it’s time for a business to investigate new locations for itself, decision-makers have a big job. Commercial real estate brokers and their tenant clients need to tour locations and experience spaces in ways big and small. Putting together tour books — the right mix of location information and space experience — is a major challenge. Yesterday, a new software tool arrived that smooths out and radically speeds up the process of building, distributing and collaborating on space tour books. Introducing Spaceful by Xceligent.
What used to take hours now takes minutes with Spaceful. “The space-tour is a critical step on a broker’s path to closing a deal,” said Doug Curry, Xceligent CEO. “So, we created a tool that makes that process fast and hassle-free. Brokers can now assemble digital tour books in minutes – not hours – and edit or update them in real time based on feedback from colleagues and clients,” Curry said.
Spaceful delivers dynamic tour books that contain easy-to-view, detailed information on spaces and buildings, area information including notable companies nearby, retailers, restaurants, and public transportation options.
Assemble Tours Easily
If plans change, reordering tour stops is a snap – real time map updates reflect property information contained in past tour books, third-party data providers. Include information about notable neighbors and area amenities with ease.
Send Tour Books To Clients The Way They Want Them
Click to browse a sample tour book — no more paper! Spaceful’s sharp digital interface presents the books to clients’ smart phones, pads or computers – send out links to participants in a snap.
Collaborate Easily On Tour Books
Spaceful allows you to share work-in-progress tour books with collaborators. Leverage your entire team’s knowledge of the area and bring it to bear at exactly the right time and place.
Try Spaceful For Free
A major problem with using statistics is that today it’s much easier to count things than it is to decide exactly what to count, or exactly why to count. The answers we obtain when analyzing economic and commercial real estate data may reflect the real world, but there’s no guarantee that a set of questions are the right ones. In data science or statistical analysis, the quality of an answer entirely depends on the quality of the design of the question asked.
The way they describe this problem in the computer science world is: garbage in, garbage out. And out it comes indeed: when you ask the wrong question (or a question lacking in the right detail) the answers you get will come pouring out just as plentifully and convincingly as when you ask the right question.
The Retail Closures Question
As e-commerce continues to radically reshape the retail ecosystem, disrupting decades of assumptions about physical space, parking and real estate value, it’s perfectly reasonable to notice that a growing number of once-venerable retailing brands have closed, or are threatening to close, or are pointedly denying they will close.
In such a world, it’s reasonable to wonder what effect all this change is having on retail rents generally. That’s a good general question to put to statistical analysis, but incomplete in its basic form — you have to define exactly what retail rents are, and you have to decide what makes a good relationship between closures and those rents.
This is what Barbara Byrne Denham, an economist in the research department of Reis, Inc. has done. Her best effort to keep garbage out was to get a good handle on what rents were in metros across the country. She included data on rent growth, ranking metro areas by their growth in rent rates, such data coming from within her Reis data warehouse. From her piece “Impact Of Large Chain Closures On Retail Rents” published last week in NREI:
Few, if any, have analyzed the impact of these store closures on real estate statistics. Having property- level retail real estate data, analysts at Reis have been tracking store closures for the larger, more high-profile brands across the country. In short, the Reis database includes 280 store closures in 59 of the 80 primary retail metros that Reis tracks, totaling 12.8 million sq. ft. of closed stores across the United States. The major brands include Wal-mart, Kohl’s, Sports Authority, Pathmark, Superfresh, A&P, Waldbaums, Haggen and Kmart. Many of these closures were concentrated in a handful of metro areas, including Chicago, Central New Jersey, Northern New Jersey, Philadelphia, Long Island, San Diego and Los Angeles—all of which had more than 400,000 sq. ft. of store closures from 2015 through July of this year.
The report looks at the percentage of inventory that store closures account for and the change in rent growth rates by metro. The purpose of this analysis is to see if and how these store closures have affected rent growth rates. In short, the closures may have impacted these metros, but there is no overall conclusion that can be drawn from the data. It should be noted that this detailed data does not include details on whether or not the store spaces have been re-leased to other users. Some may have been in the interim.
The conclusions are carefully drawn in Denham’s work, as she meticulously spells out the limitations of the analysis, highlighting where and how it could differ from the real world. It’s not glamorous or provocative to be complete and correct about what a study has found, nor to be scrupulously above board concerning the work’s assumptions. The business world wants plain and actionable insights, validated by “crunching the numbers”. This isn’t that. Denham’s study suggests that the impact of sizeable retail closures on rent growth was one of many factors that contributed to declines in rent growth, and perhaps not even the strongest factor.
The study is a helpful look into a use of statistics to ask the right questions, to avoid garbage-in-garbage-out and to be scrupulous in never confusing correlation (stuff that happens nearby something else happening) with causation (stuff that happens because something else is happening). In an age marked by oceans of “big data” and thousands of software tools to work through it, it’s of growing importance that we all focus on the quality of the questions before we accept the significance of the answers.
Kmart, granddaddy of the big box retail format, addressed fears yesterday that the brand’s recent struggles are fatal. Kmart CEO Eddie Lampert took to the pulpit to deny “recent reports” that the chain was near the end, a matter of great importance to hundreds of Kmart-anchored shopping centers across the US.
Reports have persisted over 2016 that the chain was in a free-fall, but Lampert took issue with the fears in a statement posted at Kmart parent Sears Holdings:
I also wanted to comment on the frequent false and exaggerated claims surrounding our Kmart business. Recent reports have suggested that Kmart will cease its operations. I can tell you that there are no plans and there have never been any plans to close the Kmart format. In fact, we’ve been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innovations and Shop Your Way. To report or suggest otherwise is irresponsible and is likely intended to do harm to our company to the benefit of those who seek to gain advantage from posting these inaccurate reports.
There are a few things that are very important for you to keep in mind. First, Kmart continues to operate over 700 stores. Second, a significant number of these stores are profitable and have been profitable for many years. Third, we have been clear that we are intent on improving the performance of our unprofitable stores and, if we cannot, we will close them. Actions to improve our store productivity, including reducing inventory stored in the stockrooms, are designed to make our stores easier to operate and to eliminate unproductive inventory and processes. Decisions to close stores are never easy, but we recognize that the way people are shopping is changing significantly. This is why we have made major investments in our online and mobile platforms and this is why our focus on serving members through Shop Your Way is so important.
Uber Partnership Touted
In what could become, if proven successful, a game-changer for shopping center parking space calculation formulas, the Shop Your Way customer-convenience program touted by Lampert leverages both Kmart and Sears brands and includes an innovative partnership with ride-sharing powerhouse Uber. Points and reward programs are used to tie ride-sharers and Uber drivers to the Kmart brand at the same time they shop among Kmart and Sears’s shelves.
Will the new customer-convenience programs rescue these troubled, venerable retail brands? Can Kmart and Sears innovate their way into the future? Can a recipe of hundreds of millions in loans from its CEO plus new ideas rescue Kmart? Answers to these questions are fast approaching, anticipated by landlords, managers and brokers from coast to coast.
An article in the Japan Times reports that the familiar convenience store brand 7-11 is on track to become a lot more familiar and convenient. The chain currently operates 8,500 stores in the United States, but its Japan-based parent company has announced it plans to bump that number to 20,000.
The 11,500 new stores are part of an ambitious plan to increase not just the real estate footprint but the average daily sale at the stores:
Seven-Eleven Japan Co. expects to open thousands of new stores in the U.S., increasing its current tally of 8,500 to 20,000, President Kazuki Furuya said.
The unit of Japanese retail giant Seven & I Holdings took full control of 7-Eleven Inc. of the United States in 2005.
The U.S. unit is now prepared to expand its network after introducing Japanese-style product development and services through personnel exchanges with Seven-Eleven Japan, Furuya said.
He said whereas U.S. customers tended in the past to be lower-income people, increasing numbers of the middle-class are now using the outlets because the quality of goods has improved.
The U.S. unit believes it can boost its average daily sales per shop to between ¥800,000 [$7,969.00] and ¥900,000 [$8,965.00] from some ¥500,000 [$4,981.00] at present, he said.
US Real Estate Department
Commercial property professionals with ideas on how to facilitate the chain’s new goals can contact 7-11’s Real Estate department at its corporate website, which includes a form to submit property for consideration and a downloadable Development Market Map to highlight areas of priority to the corporation. Other contact can be made with the details below:
Real Estate Department
P.O. Box 711
Dallas, TX 75221-0711
(Photo credit: Wikipedia)Related articles
At its September meeting yesterday, the Federal Reserve Board noted one way and voted another. The Fed voted 7-3 to leave its Federal Funds interest rate untouched at its low level, suggesting the commercial real estate national markets will not have to worry about escalating cost of capital — at least for now.
In a press release following the vote, the Fed cited a strengthening labor market plus a picking up of economic activity in the second half of the year as a justification for the vote. Inflation fears were addressed by noting the level remains under the Board’s long-run goal of 2%.
The Federal Funds Rate’s target was allowed to stand between 1/4 and 1/2 of 1%, despite the “case for a [rate] increase [strengthening]”:
Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
Prime Rates Primed To Stay Put
The Federal Funds rate is deeply tied to the prime rates each commercial bank offers to its least risky borrowers, prime rates tracking more or less consistently at 3 percentage points above the Federal Funds rate. The next Federal Open Market Committee (FOMC) meeting where the issue of interest rates will be again considered is scheduled for November 2.