Parking - Hidden Costs and Difficult Conditions

Looking back on deals the Omaha team has completed this year, I noticed a very common theme… parking was one of the primary deal points on each large office project. Consistent with trends across the country, many of our clients in 2017 were businesses seeking to load their office space with upwards of seven (or more) employees per 1,000 rentable square feet. This made surveying the market difficult, as many Class A or B buildings only offer parking options allowing four or five spaces per 1,000 rentable square feet. Couple that with the relative lack of new construction in the market and clients were left with limited options to pursue because of the complex nature of either having to assemble parking commitments with neighboring buildings or reviewing parking easements with buildings that have common ownership groups but may not adjacent to the facility in which the client is interested. Either way, these were tough deal points to work through and are a sign that tenants demand something different than what developers aspire to build.

Put simply, everyone knows there is more to an office lease than your physical space. To a client of your business, your space is only as good as the building common areas that lead to it. After all, it's hard to get to a suite on the 8th floor if you don't have a lobby to walk into and hallways to walk down. Possibly even more important than the common area is the parking garage, ramp or lot that your building offers. Paying careful attention to the parking area itself, the costs associated with using it, and your rights within that parking area can help to ensure that the office lease you sign is the right one for your company.

All office buildings offer some form of on-site parking. In a suburban garden building or park, it might be an extensive lot. Mid-rise buildings might offer an attached ramp and downtown high-rises frequently offer a portion of the building that is dedicated to parking either above or below ground. Before signing a lease, you have to answer two questions about your proposed building's parking: is it adequate and, secondarily, are your rights within it adequate and reasonably priced for my needs.

Assess the Parking Situation Thoroughly

Touring the parking facility is an important part of any building tour before you sign an office lease. As you go through with the landlord’s representative, look at basic considerations, like whether or not the spaces are large enough for your employees to be able to comfortably park (given the norms of the market). Pay careful attention to how long it will take to get from your suite to your car to the driveway. If you are looking at a ground floor space in a garden building, that time could be measured in seconds. In a CBD high-rise with multiple elevators to ride and the potential to need to drive through four floors of parking to get to the exit, it could take 10 to 15 minutes.  Believe it or not, this factor alone will affect your employee’s perception of the space and will likely carry similar weight in the long run than simply having high-end common area finishes, as opposed to a strong parking arrangement.

Next, return to the building a few times during the day to see what it is like to actually park there.  Different tenants have different peak hours depending on their core business, so it is imperative your broker helps you understand why the current tenants fill the lot the way they do and what that picture would look like if you were to replace that other tenant who may be running a call center operation with an over-market parking load on the building. While the visitor parking is probably always convenient and always open, once you're a tenant, you won't be parking there any longer. Instead, you'll have to slog it out through the snow and rain with everyone else.  See if there is reasonable availability in the "regular" lot at the beginning of the day, middle of the day and even at the end of the day. What you're looking for is reasonable availability. On the other hand, if a building is half-empty and the lot is still three-quarters full, you might have some problems if you take up the remaining space.

Analyze Your Office Lease

As always, read your office lease carefully to see what will happen if you go over your limit on allotted spaces, as this is a common occurrence if you have a dense build-out and have people in the office regularly.  Landlords will often times charge a penalty for taking more parking spaces than what the building offers for your floor plan, as allowing tenants to park at their leisure will adversely affect the building’s overall marketability if the lot is full but 20 percent of the building remains unleased. If you have to pay for parking, estimate those costs if you will be bearing them. You might find out that it makes more sense to pay more rent and get lower cost parking. Finally, ask your tenant representative, since he has helped many other tenants in this situation.

Related blog posts

Managing the Canopy for Growth
Blog
August 1, 2019

Managing the Canopy for Growth

How do you manage your business when you’re in a fixed lease or experiencing unprecedented growth? Like a vintner, The Advisor looks at the business vineyard process to decide what to change or improve in order to support the growth of your business.