“Car parks in Australian CBDs are in many ways a finite product,” the Colliers International Australian CBD Car Parking white paper said.
“There are now very few new car parks being built within CBDs, certainly not enough to keep up with demand. In addition, most city councils are actively looking at ways to limit car access into CBDs.”
The report pointed to statistics from RP Data which revealed that in Sydney, the number of non-residential car spaces declined between 2006 and 2011, dropping 45 spaces to a total of 28,498. Brisbane had the biggest increase in the same period, with 3,444 more spaces available in 2011.
Looking forward, the report found that only 127 new spaces are planned for the Sydney CBD in the next two years, while Melbourne is expecting 700, Brisbane 274, and Canberra 270. Perth and Adelaide were also expecting more car spaces to be built, although a specific number wasn’t provided in the report.
This lack of new development is coming at a time when demand remains strong, the report said.
“Access Economics forecast that an additional 79,000 workers will inhabit our CBDs over the next four years. The strongest increases are expected to occur in Sydney and Melbourne CBDs.”
While government policies and a shift by office workers towards other modes of transport – including cycling – might undermine some of this demand, the report said investors remain attracted to this class of property for a variety of reasons.
“Car parks are a tightly held asset class that rarely trade, even in good economic times,” it said. “The types of investors that are attracted to car parks include car park operators, investors looking to spread their investment risk over a variety of property types and, particularly in the CBD, investors looking for redevelopment opportunities.
“Dependent on location, car parks are attractive as sources of secure cash flows with relatively stable income growth, although…can be susceptible to changes in government policy.”
Benefits of investing in car parks outlined in the report included:
- Limited or no obsolescence
- Reduced levels of capital expenditure/upgrade costs compared to more traditional investments
- Car parks have a diversified income stream derived from multiple users
- Restricted future supply to most major CBD locations throughout Australia with city councils discouraging construction of new commercial car parks in the CBD in order to reduce traffic flows to the CBD
- Inability of an ageing public transport system to keep up with demand of population growth
- Minimal management required
- Potential opportunities for redevelopment
“Yields have increased and have only just started to show signs of stabilisation, and some firming, over the past 12 months,” the report continued.
“In comparing car park sales, differences in yields depend on a range of factors including the lease or management agreement structure and term, location and proximity to certain positions within the CBDs (e.g., higher values close to main retail malls/centres).
“The most recent car park sale is a component of 300 Flinders Street, Melbourne which transacted in November 2011. The sale reflected an initial yield of 7.6 per cent.”