Commercial Parking in the COVID-19 Era

Executive Summary

The COVID-19 environment and its impact on the commercial real estate industry in general – and commercial parking in particular – is unprecedented in modern business. Both the severity of the impact and the immediate nature of the decline in parker volumes have been unlike anything in our lifetimes. During this period, Parking Advisors, Inc. has closely monitored parking demand, revenue and operations at commercial parking facilities in large MSAs in the U.S. and Canada. This white paper is intended to summarize Parking Advisors’ observations and experiences to date, and to outline a roadmap for our clients to follow in the coming months.

Parking Advisors’ client list numbers well over 100 of the largest institutional asset owners and managers in the U.S. We currently have 54 commercial parking facilities located in 24 major MSAs in the U.S. and Canada in our asset management program, with valuation exceeding $2 billion. From our conversations with clients and data collected from assets under management, following are key observations from the recent downturn, and our thoughts on the going forward environment:

1. The environment has been challenging for the parking industry – Parking demand has dropped by up to 95% and a significant number of monthly parkers have requested suspension of the accounts – this happened suddenly and has impacted most large parking facilities. While frustrating, this was to be expected given the timing and severity of the COVID-19 restrictions. Due to these changes resulting in economic distress, unfortunately many operators have struggled to pay rent or disbursements of operating funds and have implemented widespread layoffs negatively affecting the financial performance and operations at these assets.
2. Facilities with built-in protections and strong operating teams have fared better – Assets where tenant leases include “must take” clauses for parking spaces, facilities where operators were proactive in their monthly parking collections, and teams that properly managed the messaging to customers have posted stronger financial results in the downturn. The impact upon March financial results was minor as a result of these factors.
3. Recovery is likely to be gradual and demand is likely to be lower through the balance of 2020 – All factors point to phased return-to-work policies and slow recovery in parking demand. Two competing factors will impact future demand in the office sector. More workers are likely to drive rather than take public transit; however, fewer workers are likely to be in the office. Anecdotal data leads us to project that the net impact will be negative through the balance of 2020. The long-term impact on parking demand will depend upon multiple factors, including public health strategies, companies’ work policies, public sentiment and the economy in general. In any case, workers’ reluctance to utilize public transit, particularly during morning and evening rush hours, is highly likely to impact behaviors for years to come.
4. A measured approach to recovery is recommended, with personal safety as a primary concern – Parking operators and property management teams are developing their strategies for reopening parking facilities and/or preparing for the return to work. A written, clearly defined operations plan for each facility should be mandatory and should focus on facility cleanliness, social distancing enforcement, adaption of online sales, enhanced signage and other strategies that reduce customer touch points and PPE for employees.
5. Valet parking is a big question – For the foreseeable future, both parkers and garage employees will be reticent to valet park vehicles. This likely means a dramatic reduction in non-essential (hotel, restaurant, etc.) valet services. Valet-only office buildings and buildings with valet assist services must put in place strict policies, PPE for attendants, and quality assurance programs.
6. A diligent approach to parking operations will be essential to success – In the past several years, Parking Advisors has advocated a hands-on asset management strategy for large and active facilities, including the collection, validation and analysis of detailed activity, transactional and financial data. In conjunction with our processes for reviewing asset results, we’ve tracked additional data points for assets in our program during the COVID-19 downturn. Parking facilities at properties that have adapted this focused approach have consistently outperformed peer properties. We strongly recommend continued focus over the next several years, as technologies and operators are expected to be insufficient to keep pace with the changing environment.
7. Technology enabled solutions are critical to the future – One important lesson from the COVID-19 downturn: manual business processes, lax reporting platforms and inefficient garage technologies have resulted in substandard financial performance. Improved garage and reporting technologies will be even more critical in the future for two key reasons; first, they will be essential to streamline processes, ensure accurate financial reporting and maximize asset performance. Second (and more important), customers will place a high emphasis on efficient “frictionless” solutions to support changes in commuting and travel and to ensure personal safety. A true end-to-end technology enabled model is badly needed by the real estate and parking industry; current piecemeal solutions are not well equipped for the future.

The COVID-19 Environment and Its Impact

Parking Advisors is in frequent contact with parking owners, operators and property teams nationwide. We have assembled a list of the key takeaways from conversations and data gathered from our asset management program over the past six weeks.

Most property owners took a cautious and balanced approach to the COVID downturn – In the weeks following the COVID-19 outbreak, three themes commonly governed our clients’ decision making:

• Customer Relations – Asset owners were commonly focused on the bigger picture and long-term customer relationships, chose to be reasonable in accommodating tenant and employee requests to suspend their parking and directed parking operators to act accordingly. A common theme was that asset owners wanted to make sure that parkers return to park in the facility in coming months.
• Concerns for Garage Employees – Most asset owners declined to immediately furlough or lay off employees and instead relied upon attrition to manage labor costs. In cases where employees felt unsafe working in the facility their requests to voluntarily furlough were accommodated.
• Contractual Obligations Prevail – As is the case with any institutionally owned asset, the contract matters. “Must take” lease language, 30-day cancellation clauses and other provisions were and are important to understand and enforce. Likewise, the contracts between the parking operator and asset owner govern that relationship, as well as any discussions about altering the funding of operations, rent payment obligations and other provisions.

Parking demand has declined by up to 95% in the COVID environment – Parking demand has declined significantly beginning in March 2020. In general, garage occupancy has tracked with the timing of the business activity slowdown and local shelter-in-place orders in major cities. The following are observations from data tracked at 54 parking facilities in Parking Advisors’ asset management portfolio. These facilities are located in 24 different MSAs, providing data from a portfolio that comprises a cross-section of assets located in the U.S. and Canada:

• Garage Occupancy – Facilities reported occupancy as low as 5% in several markets. Average peak mid-week garage occupancy dropped from February to April by an average of 63% across the portfolio.
• Monthly Parking – The rate of suspension and cancellation varied greatly by market and by garage; several garages had 50% of the monthly parkers suspend or cancel, and one had 100% of the parkers cancel. On average, portfolio assets experienced an average 21% suspension rate, with a median of 16%.
• Daily / Hourly Parking – The drop in daily / hourly revenue has been the most significant and is the main indicator in determining the impact to the garage financial performance. For the second half of April 2020 parking revenue at portfolio assets dropped an average of 88%, with a median of 91% compared to February 2020 numbers as the baseline.
• Online Parking Sales – Online sales of daily / hourly parking has declined to a lesser degree compared to drive-up traffic. We attribute this to two factors; first, in an uncertain economic climate, parkers commonly seek the best parking value. Second, parkers desire to pre-purchase their parking for personal safety reasons. Buying online eliminates the need to take a parking ticket, stand at a pay station and touch the various buttons and other points involved in these types of transactions.

March 2020 financial performance varied greatly by garage – March 2020 garage financial performance varied significantly from garage to garage and market to market. Several factors impacted this, and are important to understand as recovery begins to take place, including the following:

• Timing of the Downturn – Several markets had shelter-in-place orders issued later in the month of March, so the impact upon daily / hourly parking activity and revenue was less impactful. In contrast, several markets were impacted much earlier in March as orders were issued, creating a greater impact on March financial performance.
• Tenant Contractual Obligations – Buildings with tenants having “must take” parking clauses in their leases and which were affirmatively enforced were impacted less than other facilities. Most owners considered these to be firm lease obligations, and any abatement discussions were considered in the context of the other lease commitments and rental obligations. As a result, significant revenue was preserved at many assets and suspension rates were lower than would have otherwise been expected.
• Operator Communication Strategies – In many markets, garage occupancy was high in the months leading to the downturn. Some parking operators told parkers that, if they chose to suspend their parking, they could not be guaranteed a spot when business returns to normal. This mitigated the number of suspensions and cancellations at some facilities. In contrast, some operators actually reached out to parkers and offered to suspend their monthly parker accounts – a baffling strategy that resulted in lost revenue for the property owner.
• Parking Collections – At facilities where the parking operator was effective in collecting monthly revenue in the first week of March, the financial impact of COVID on March revenue was much less severe. Unfortunately, not all operators were diligent in their March collections.
• Labor and other Cost Savings – Some owners proactively reduced their garage labor, sweeping, power washing and other non-essential spending. This had a measurable impact on net parking income.

The parking operator environment is showing signs of distress – With some very welcomed exceptions, the COVID-19 environment and resulting economic disruptions have exposed several concerns with parking operators of all sizes – both local / regional and national operators.

• Service Levels – In general, the service levels from operators have dropped in recent years, despite strong parking demand and market expansion in many MSAs. The impact of company mergers, the pressures of public ownership, a tight labor market, a low flat fee environment and increased G&A costs contribute in varying ways to challenges for all operators. To survive, many have stretched their teams and cut back on quality assurance and other critical functions. Basic services (such as monthly parking fee collection, revenue reconciliation) have been challenging at times, and value-add services (such as facility marketing and customer service enhancements) have been eliminated altogether in many cases.
• Financial Viability – Almost immediately following the COVID-19 slowdown many operators were exhibiting signs of distress. Examples include operators who delayed or withheld the payment of operating funds, some who have refused to pay rent on lease agreements, and others who have charged through extra pay periods for pass-through employees. Disturbingly, this has occurred at facilities with continued strong cash flow. Senior executives have been laid off or put on reduced salary at most large operating companies. Since these companies generally operate on a fee-for-service basis and many salaried and most hourly employees are direct pass-throughs to clients, all of this is troubling with no clear end in sight.
• Job Performance – Our clients required detailed operating cost analyses and thoughtful, well documented 2020 operations reforecasts at exactly the time that operators were least able to comply with these requests due to furloughed management teams and the challenges of remote working conditions. While performance was compromised pre-COVID-19 in many cases, at some facilities the “perfect storm” hit in March 2020. Operators failed to collect monthly parking fees in the first half of the month, and COVID-19 hit in the second half of the month, leaving the assets and operators exposed financially. Parking Advisors is concerned that some operators lack the systems, or the remaining staff with sufficient working knowledge to navigate through the immediate future.
• Encouraging Signs – Despite the recent concerns, there are some positive signs. Some large operators have articulated clear, thoughtful and measured approaches in their management of at-risk contracts and messaging to employees. One operator explained that the company’s savings from their reductions in executive compensation were used to offset the cost of furloughed workers’ health insurance, which is a refreshing message. Focusing on going forward strategies, Parking Advisors has reviewed post-COVID workbooks and protocols from large national and smaller regional operators and we have found them to be well organized and responsible in their approaches.

Parking technologies and business platforms are insufficient to fill the void – The COVID-19 environment has also exposed shortcomings of garage technologies, accounting systems and enterprise financial reporting platforms. Owners and property teams, have required detailed information related to the garage performance and activity and the systems or platforms often complicate, rather than simplify, the process. Many facilities have become more “automated” by default, with fewer (or in some cases no) onsite garage staff – exposing systems’ shortcomings.

• Access Control Technologies – These systems are intended to calculate, collect and report daily / hourly revenue, and to control garage access for monthly parkers. The systems are expected to generate revenue and access reports that can simply be rolled up to operator reporting systems and financial statements. Parking Advisors has reviewed reports at well over 100 parking facilities nationwide over the past several years, and we’ve determined that the system-generated reports very rarely tie out to the operator’s financial statements.
• Billing and Reporting Platforms – The platforms for billing, reconciling and reporting revenue are equally substandard. For example, the monthly parking billing and reporting system that is utilized by many parking operators lacks a “suspend” feature. As monthly parkers have temporarily suspended their parking during the COVID-19 outbreak, the operator must perform a manual workaround to suspend the billing, and then remember to reverse it once the parkers return to work and wants to reactivate the account. Compounding this, billing systems do not communicate with the garage access systems, so the process for turning off / on key cards is manual and must be performed onsite. Since there has been little or no staff onsite at many garages, it is highly likely that many suspended parkers actually have garage access.
• Business Intelligence Platforms – Several parking operators and a third-party firm tout sophisticated platforms that harvest facility data and overlay analytics to measure performance and support value-add decision making. This is great in concept: however, the platforms lack reliable data inputs from access control systems and in most cases, they are not useful or even functional tools.
• Customer Service Call Centers – All large parking operators, and most large local/regional operators, provide “sophisticated” remote management platforms that are intended to enable complete 24/7 control of the facility remotely with the ability to “push rates” to the lane, and detailed reporting and diagnostic tools. However, the reality is something different; in most cases when a parker has an issue in an exit lane, the operator simply vends the gate and unless the issue is forced, most call center reporting is basic / manual in nature, lacking any analytics at all.

What does recovery look like?

Most scientific models project the spread and containment of COVID-19 will be a challenge well into 2021. Likely approaches to controlling the spread and damage from the virus include a combination of widescale testing, periodic isolation and quarantine. As cities and regions begin to re-populate their buildings, it’s clear that this process will be gradual, and some cities and states will likely be hit with repeated cycles of social distancing. From Parking Advisors’ research, our discussions with clients and analysis of facility data, the following are likely trends:

• The recovery in parking demand will be gradual – The downturn in parking demand and facility occupancy that occurred in March 2020 was abrupt, significant and unprecedented. The recovery is not likely to happen as rapidly. By all reports, employees will return to work gradually, with those who are essential to the business or are involved with functions that cannot be performed remotely, returning first. We’ve talked with multiple large companies that have active task forces to determine going forward plans for employee densities, work schedules, travel policies and other critical employee related matters.
• Every parking facility will recover differently – Return-to-work plans vary greatly from company to company and commuting options also vary from city to city. Multiple factors will likely impact parker demand and patterns as well as customer expectations in the coming months. Parking facilities that are governed by tenant “must take” clauses will experience less of an economic dip than facilities lacking these minimum utilization requirements.
• Many employees are likely to change how and when they commute to and from work – In markets with efficient public transit systems, many workers have utilized these resources and systems heavily in the past. Buses, subway cars and train cars have been packed to capacity during rush hours. This is likely to change, as some workers drive to work and others stagger their work hours. In many cases, this will mean higher parking demand and higher garage occupancies. Office tenants are likely to employ strategies that include partial working from home, staggered start and stop times, and adjustments to and reshuffling of work spaces to accommodate their workforces. This will almost certainly mean that parker patterns of use will change.

Case Study: Chicago CBD Parking Garage

A Parking Advisors client owns a freestanding garage that primarily serves office workers. Most monthly parkers work in nearby buildings that are convenient to public transit (i.e. within walking distance of three public rail services and multiple bus stops). The State issued its shelter-in-place order effective March 21. Despite this, 25% of the of the monthly customers parked more often than the average of the prior three months, and those parkers used the garage an average of 5 additional days. During April, 14 of the parkers used the garage more often than the prior three months, again an average of 5 additional days. This implies that, in response to the COVID-19 outbreak, those parkers who needed to commute downtown chose to drive to work rather than take public transit.

• Traffic patterns will likely change during the weekday – With more people driving to work, this should mean more traffic, correct? The answer is maybe. Multiple factors impact traffic. For example, in many large cities (Chicago and San Francisco are notable examples) the impact of Uber and Lyft has grown in the past several years. In these cities, many people no longer drive themselves to mid-day meetings — Uber and Lyft options are ample and cheap, and the heavy traffic they generate makes driving to and from a meeting inconvenient and impractical. That could change — and could mean a recovery in short-term (and highly profitable) hourly parking throughout the day at some garages.
• Some businesses may not recover, while others will thrive and expand – Some office tenants may fail, shrink or relocate. Many restaurants and retail businesses may not reopen. Recovery of hotel demand may be slow as business travel is curtailed and conferences are deferred or cancelled. It may be some time before sporting events, concerts or other large events return. In contrast, some office sectors may thrive and companies will expand. This will all have an impact on commuter patterns and parking demand.
• Parking rates are likely to be flat in many markets – Historically, parking rates generally move in response to market conditions. In many MSAs, rates have been flat over the past five to ten years, generally due to two factors; parking operators commonly lack the motivation or ambition to increase parking rates, and many parking owners and their leasing agents focus primarily on leasing efforts and customer satisfaction. Lacking fundamental shifts in decision making and/or parking demand, it is likely that parking rates will lag the recovery in parking demand over the next several years.
• Online sales strategies will be critical going forward – In the current environment, online sales have dropped by 60% to 70%, while drive up daily / hourly parking demand has dropped by 90% or more. This is likely attributable to two factors. First, in any economic downturn the buying public becomes very cost conscious. Purchasing parking online gives the customer visibility into market pricing and the ability to preselect the highest value product. Second, purchasing parking online allows the parker to have a “frictionless” experience, avoiding ticket dispensers and the need to stand at a pay station, touch dirty buttons and fumble with cash or a credit card.
• Valet parking will very likely be a challenge – It may be some time before parkers are comfortable handing their cars to valet attendants, or for valet attendants to feel safe driving other people’s vehicles. This will certainly impact parking at restaurants and hotels; it will also impact parking at valet only or valet assist commercial parking facilities. In some markets, increased parking demand due to reduced public transit usage may create the need for valet assist services. Operators must provide PPE, put strict operating controls in place, and constantly audit and test compliance going forward.

Prepare for the new reality

As businesses recover, employees return to work and parking demand recovers there are steps that property owners, managers and parking operators can take to succeed — to the extent possible — given the new reality of the public health and business environment.

First, it is important to understand — and communicate to employees — that there is no such thing as “zero risk”. The goal is to take reasonable and actionable steps to minimize risk. Your parking operator should be an active participant in risk mitigation strategies. Every parking operator must have a written post-COVID manual or toolkit in place that includes minimum protections for all employees and customers that are clear and enforceable.

There is a concept in public health known as the hierarchy of controls that can guide garage owner and operator policies, and the prioritization of resources and efforts. The hierarchy of controls is how the field of occupational health thinks about protecting workers from any hazard — biological, chemical, or otherwise. There are five types of controls, moving from the most effective at the bottom to least effective at the top. The graphic on the following page from the Harvard Business Review illustrates this concept and its relevance to the office and business environment in the COVID-19 environment:

Applying this concept to commercial parking facilities in large North America MSAs, Parking Advisors can help our clients to organize and prioritize their garage operations, starting with activities that are likely to have the highest impact:

1. Elimination of Exposure – Over the past weeks and months, most employers have either implemented work-from-home policies or reduced their workforces. This is likely to continue, to some extent, for many employers for the foreseeable future.
2. Substitution of Activities – Beginning in May, employers in some markets are gradually directing their employees to return to work, based upon shelter-in-place orders and other restrictions being eased. We have talked with several large companies that are taking steps to plan their return to work, including assessing employees’ ability to work from home, studying options to de-densify the workplace, and assessing their employees’ abilities to safely commute to and from work. All signs point to these processes being implemented gradually, and differently from employer to employer. This is the basis for our prediction that recovery of parking demand is likely to continue into 2021 at many facilities.
3. Engineering Controls in Spaces – The parking operator and the facility team should work together to employ strategies that support ownership’s efforts to address tenant and parking customers’ goals. The key is to create a healthy and safe parking environment. The parking facility can support ownership strategies for the asset, including the following:
   • Ensure the best possible air quality – Run the ventilation fans, open windows and doors to bring as much fresh air into the facility.
   • Make sure the garage is dry, clean and free of pests – Sweep and power wash the floors and walls, manually clean trash from garage floors, vestibules and other areas, quickly clean up spills on the floors and wipe down areas where spider webs accumulate; these steps help present the facility as clean and well maintained. During the COVID-19 downturn, Parking Advisors has been working with parking operators to perform deep cleaning tasks, scrub oil spots, paint curbs, etc. utilize otherwise idle staff.
   • Constantly clean “high touch” points – Janitorial and maintenance staff who were formerly “back of house” should be visible and perform frequent cleaning and sanitizing of doors, windows, handles, elevator buttons and interiors – all surfaces that are frequently utilized by customers. The efforts should include frequent cleaning of parking entry, exit and pay stations. Disinfecting cleaners should be uses and cleaning cloths should be changed frequently.
   • Ensure adequate lighting levels the garage – High lighting levels communicate to customers that a parking facility is clean, safe and well operated. Burned out lights should be replaced immediately and light lenses should be kept clean.
4. Administrative Controls – Parking operations can take steps to support tenant and customer dedensification and social distancing strategies. Opportunities include the following:
   • Encourage touchless or low-touch parking options – This should be a critical component of a long-term strategy. Near-term and immediately available solutions include the following:
     • Purchase hourly parking and validation packages online – Online purchase platforms exist for customers to purchase daily/hourly parking and validations. Most of these platforms (including some parking operators’ proprietary platforms) charge high fees or commissions that reduce the net income to ownership. Parking Advisors has developed a commission-free platform for our clients; this can be immediately rolled out at clients’ facilities.
     • Pay for monthly parking online – Surprisingly, many tenants and individual parkers still drop off a check in the garage office to pay their parking bill every month. Most parking operators offer online payment options, and these should be leveraged to the extent possible.
     • Leverage online validation options – Some parking access control systems provide online validation solutions that can be used by tenants to validate their guest parking. These should be understood and rolled out.
   • Increase customer communications – Using signage, building newsletters, email and other tools to develop frequent communications in order to convey changes garage policies, encourage staggered commuting times, revisions to garage hours and rate structures and personal safety suggestions.
   • Encourage social distancing – Develop strategies for limited or staggered usage of elevators, building lobbies and other gathering points, and use signage to reinforce the policies.
   • Minimize garage “choke points” – Garage operators can also utilize signage and staff to make sure traffic flows smoothly. Parking equipment should be well stocked with tickets and receipts, and preventive maintenance programs should be up to date so parkers do not get delayed or stuck in entry and exit lanes due to equipment malfunctions.
5. Take steps to implement Personal Protective Equipment (PPE) – Parking facilities can take steps to ensure that garage employees and parking customers are provided with appropriate PPE.
   • Provide sanitation stations for customers – In addition to ensuring that the facility is as clean as possible, the placement of automatic hand sanitizer stations is encouraged at elevator lobbies and other pedestrian access points.
   • Provide adequate protections for garage employees – The parking operator should have clear written standards that are communicated to all employees. Reasonableness should prevail, however in all cases the operator should act immediately if an employee exhibits COVID-19 or related symptoms, or feels like they are put into an unsafe situation. The operator’s policies should clearly state that if an employee feels ill then he or she is expected stay home.
   • Limit valet exposure and implement strict valet protocols – Providing valet and valet assist services will be a challenge for the foreseeable future; however, some facilities operate on a valet-only basis, while others provide valet assist services to increase garage capacity. Suggested protocol includes the following:
     • Utilize signage to communicate with customers – Prior to entering a facility, the customer should be aware if valet service is mandatory so he or she has an opportunity to park elsewhere. This should also be clearly communicated on the building website and any online sales sites.
     • Minimize valet attendant exposure to customers and vehicles – When possible, valet attendants should direct parkers into self-park spaces rather than immediately taking the keys and parking the vehicle.
     • Provide and enforce strict PPE protocols – Valet attendants should wear masks, utilize sanitary wipes and use latex gloves to reduce cross contamination.
     • Utilize ticketless valet controls – Implement handheld devices that issue virtual tickets rather than issuing paper tickets to valet customers.
   • Solicit customer feedback – Listen to customers; they may have valuable suggestions or legitimate and actionable concerns. Part of the job is to provide a level of comfort to the parking public; taking customer feedback seriously is important. Responses should be timely, professional, accurate and as complete as possible.
   • Conduct compliance audits and safety checks – The parking operator should have formal, regular compliance audits and facility reviews (these should have been in place all along). The audits should test the facility for compliance with the operator’s safety standards and the results should be provided to the property team or owner in real time. Any deficiencies should be immediately addressed. The property team should perform backup facility reviews as well.

Carefully watch the metrics during this challenging period

Customer usage patterns are likely to change in the coming months and perhaps years. New questions and concerns from tenants, their employees and guests are likely to arise throughout this period. Tenant and parker priorities are likely to shift and new “emergencies” may present themselves from time to time. At the same time, commercial property owners’ priorities will include maximization of the financial return on their real estate investments.

To prepare for the future, it’s important to understand the recent past. In the simplest terms, in many markets parking demand and garage occupancies have been strong in the recent recovery; however, net parking income has been flat. While factors are asset and market specific, we have observed common trends:

• Strong customer demand and high occupancies – Parking demand increased at many commercial office and other CBD parking facilities as office occupancies increased post-recession and many companies occupied their space with increased densities.
• Flat parking rates and high online commissions – While demand and occupancy increased, in many cases net revenue has been flat. This is attributable to multiple factors. Among those factors, many property managers and owners have commonly been conservative in pushing rates, parking taxes have increased in many markets, the increased presence of parking aggregators (the most prevalent are SpotHero and Park Whiz) have trained parkers to shop online and compare prices, the commissions charged by those sites (up to 30% of net parking fees in some markets) have reduced profits, and Uber and Lyft have cut into parking demand.
• Higher operating costs – In almost every market, increases in labor (both union and non-union) and related costs have outpaced revenue growth.
• Diminished marketing efforts – Unless constantly pressed, many parking operators no longer dedicate the resources to focus on marketing of open spaces, push rates or build repeat customer bases; their “marketing efforts” are commonly to simply list their open space on SpotHero and Park Whiz.

Parking Advisors strongly advises our clients that, in most markets, simply hiring a parking operator and receiving a monthly financial statement and disbursement check is no longer a formula for maximizing asset value. The current environment and likely environment going forward underscores this concern. We recommend the following approach for any property with a sizable parking revenue stream or a strong tenant or customer need for parking services:

• Make sure you have the right service provider – Parking operations is not a simple business; Parking Advisors has always advocated doing business only with companies that have effective leadership as well as the systems, processes and tools to manage, collect and report sizable parking revenue. The equation, unfortunately, has changed and now more than ever it is important to do business with companies having the financial viability to weather this storm. In most cases parking operators have in their possession tens – and in some cases hundreds – of thousands of dollars in operating funds from each parking facility.
• Implement effective contracts in place with proper protections – More than ever, contract terms matter. The current environment has exposed issues with operator management agreements and leases, as well as monthly parker contracts.
  • Parking operator agreements – These must have clear language that outlines numerous terms, including roles and responsibilities of both parties, indemnifications, detailed reporting requirements and default provisions. Given the current concerns and economic climate, we strongly recommend management agreements that require wire transfers from the operator mid-month and on the first day of the following month, with a true-up along with the financial statement. Parking leases must have clear default provisions in the case of non-payment of rent.
  • Monthly parker contracts – At most parking facilities, monthly parking is the largest revenue line item. Parking Advisors recently reviewed monthly parker contracts utilized by large and local and regional parking operators and found all to be significantly lacking. We have developed a new form agreement for our clients that includes clear cancellation policies, operator responsibilities, indemnification, penalties for nonpayment and other critical terms, and we are currently rolling this out to all of our asset under management.
• Set clear operations objectives – The parking operator should have clear direction for operating the garage, providing a safe environment for customers and employees, collecting and reporting revenue and marketing the facility. Actionable steps with clear deadlines are critical, as is accountability for completion of tasks.
• Monitor parker activity and measure financial results – A simple P&L report (perhaps with variance comments), sent on the 15th or 20th of the month for the prior month is no longer ample documentation of garage performance. First, the report lacks sufficient detail to benchmark results and make informed ownership decisions. Second, the report is record of financial transactions up to 45 days in arrears. Parking Advisors advocates a detailed reporting regimen, including garage occupancy, daily parking statistics and monthly parking collections updates that can be reviewed in real time for the current month – before it’s too late to make critical adjustments. Going forward, this reporting should include safety compliance and risk assessment reports. We strongly advocate adding a “safety scorecard” that can be used by garage staff, property teams and secret shoppers.
• Constantly review and reset strategies, parking rates and other critical path items – Parking Advisors works with our asset management clients to track detailed data points for both the current month and past months. Granular data regarding monthly parking billings, hourly parking, garage occupancy, accounts receivable, local market conditions and other key metrics are captured, benchmarked and analyzed. Where the technology allows, we track each monthly parker’s usage of the garage each month. During the COVID-19 downturn we’ve started tracking staffing levels, monthly parker suspension requests, hourly parking counts by day and deep cleaning tasks. Conference calls are held two to three times per month where we conduct working sessions for understanding recent activity, discussing current and expected trends, resetting strategies to refocusing the operating team.

Plan for the future

Corporations across North America are investing significant time to understand and plan for fundamental changes in how companies occupy office, retail and other space. Managing the near term is critical; however, understanding and planning for the future is equally important. Recommendations include the following:

• Understand how companies occupy space – A recent JLL study of office tenants indicated that, prior to COVID-19, 64% of respondents that did not work from home prior to the pandemic want to incorporate it in in the future, and 63% of respondents ranked their productivity working from home at 80% or higher. Findings such as this, combined with company’s desires to provide a safe and secure workplace, are likely to change the way that many companies operate in the future. As noted earlier in this paper, this would seem indicate that parking demand will be less at many facilities and it certainly will be different.
• Adapt to new commuting and parking patterns – The future could likely bring different parker usage patterns. For example, while more employees may drive to work they may not drive every day. The traditional mix of monthly and transient parkers may change as a result. New parking products may be requested, including partial month parking passes (the parker may park up to a defined number of times for a fixed fee), debit cards, and expanded use of validation passes. A recent trend in some markets has been a reduction in the number of companies willing to pay for their employees’ parking; this trend could reverse itself. According to a recent Wall Street Journal article, “Companies are starting to consider alternatives to mass transit, such as company car allowances, private bus services and leasing smaller office space in suburban locations closer to where many workers live. “Extremely large companies might offer to subsidize people’s purchases of private vehicles or subsidize rental cars,” said Lindsay Burke, co-chair of the employment practice at law firm Covington & Burling LLP.” As noted earlier in this paper, it will be critically important for parking operators, owners and property teams to monitor garage activity and detailed metrics in this new environment.
• Select the right business partners – The landscape of parking operators and technology providers could change significantly in the coming months and years. Parking operators, parking technology venders and online aggregators are all showing signs of distress – and the pain has been immediate and deep. Vetting service providers will be a critical step going forward. If a service provider fails the impact could be expensive and disruptive for property owners, tenants and parking customers.
• Leverage technology and data – Efficient processes for collecting and analyzing facility data will be critically important going forward. Much of the commercial property industry utilizes efficient and accurate tools to make investment decisions, measure returns and drive decision making. The parking industry has failed to keep pace with this evolution; the need will be greater given the likely financial pressures of the coming years. As a start, cloud-based Parking Access and Revenue Control Systems (PARCS) have worked well for many of our clients. We see this trend continuing as future solutions must provide true end-to-end purchase, account management, transaction processing and financial reporting all with easy to integrate API’s and supporting software; nothing else makes sense.
• Migrate toward frictionless customer interfaces – Parking purchase, access and payment solutions should be as seamless as possible, with minimal physical touch points. These solutions will provide comfort and safety to parkers, since PARCS components tend to be dirty (due to the garage environment) and constantly used by the general public throughout the day. These solutions also allow for streamlined business processes on the part of the parking operator, driving efficiency and increasing the accuracy of transaction and financial reporting. Unfortunately, the parking industry is also far behind other real estate sectors in this regard. For example, online parking aggregators allow customers to pre-purchase their parking online and simply scan a QR code to enter and exit a facility. However, they charge a very high fee for the service and require inefficient and manual revenue reporting on the part of the operator. To combat this, Parking Advisors has developed a no-commission online marketing and purchase platform in response to clients’ request. This platform is customizable and continues to be rolled out to facilities nationwide.

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About Parking Advisors, Inc.

Since its founding in 2007, Parking Advisors has provided value-add parking advisory, asset management and investment services to many of the industry’s largest and most respected commercial property owners. The firm has been directly involved with over $20.0 billion in commercial parking assets across all major US office markets. We currently provide active oversight for over $2.0 billion in parking assets on behalf of clients on an ongoing basis. Our projects have included many of the largest and most profitable commercial parking operations in the U.S.

Mark Fancher, Principal

Mark is the founder and President of Parking Advisors. A 30+ year industry professional, Mark has over 20 years of experience driving parking asset performance and developing large scale parking operating and asset management platforms. Prior to forming Parking Advisors, Inc., Mark served a number of functions, including Vice President – National Property Operations and Vice President – Asset Management for Equity Office Properties Trust. In these roles, Mark originated, developed and executed multiple operating initiatives that drove company profitability while changing industry convention. Among his accomplishments, Mark developed Equity Office’s National Parking Program, which created $530 million in value across the nation’s largest single-owner commercial parking portfolio. Mark earned a Bachelor of Environmental Design degree from the School of Architecture at Miami University (Ohio).

Kevin Dahm, Principal

Kevin joined Parking Advisors in 2009. He developed and oversees Parking Advisors’ technology, financial performance and modeling tools, and business processes. Prior to joining the firm, Kevin worked in LaSalle Investment Management’s acquisitions group, where he evaluated over $10 billion and closed $500 million of commercial real estate transactions in first tier U.S. office markets. Prior to joining LaSalle he held multiple roles in Merrill Lynch’s real estate structured finance group. Kevin earned a Master’s degree with Distinction from the J.L. Kellogg School of Management at Northwestern University and a Bachelor’s Degree in Finance and Real Estate from the University of Wisconsin.