Parking Lots and Garages Market in the U.S

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Parking Lots and Garages Market in the U.S

Central business district (CBD) parking, off-airport parking, on-airport parking, college and university parking, hotel parking, hospital parking, and municipal parking are the segments that make up the market for parking lots and garages in the United States. Because more and more people are using ride-hailing services and forgoing car ownership, the market is experiencing a slowdown. Many analysts believe that the future of parking lots and garages lies in them being transformed into hubs for ride-hailing vehicles, autonomous vehicles, electric vehicles, and micro-mobility devices.

Market Growth Drivers

The rise of ride-sharing and car-sharing services and the resulting decrease in car ownership are largely to blame for the slowdown in the United States parking lots and garages market. If the market has any chance of growing, it has to look at new construction projects and urban mobility initiatives as growth drivers. New construction projects can incorporate adaptable parking lots and garages that can be easily modified for other uses, and urban mobility initiatives can require parking lots and garages to evolve into urban mobility hubs.

New Construction Projects

  • The construction of new multi-family residential buildings, lodging facilities, office buildings, and commercial centers in urban areas is a driver of growth in the United States market for parking lots and garages.
  • The resulting increase in population may increase the demand for parking spaces. New construction may also result in the redevelopment of parking lots, which, in turn, may result in a reduced supply of parking spaces.
  • Though it is widely believed that both car ownership and the demand for parking spaces are decreasing as a result of ride sharing and car sharing, property developers and designers still need to provide parking spaces. Many residents, for example, still consider the lack of parking in apartment buildings a deal breaker.
  • Leading design firm Gensler is still designing buildings with parking garages. The only difference is that the firm is now designing garages with driverless cars and drop-off and pick-up points in mind. The garages have flat floors, higher ceilings, and a camouflaged exterior, so they can be easily converted for a different use when the demand for parking decreases.
  • Camden Property, Hudson Pacific Properties, and AvalonBay Communities are still incorporating parking garages in their projects, but similar to Gensler, they are building garages with an eye to the future. They are building these garages in a way that they can be easily modified for other uses, say, office or retail purposes.

Urban Mobility Initiatives

  • The rise of ride sharing, car sharing, and autonomous vehicles is often cited as the reason behind the decline of the parking industry. Little has been said about its potential to drive growth in the market for parking lots and garages.
  • All is not lost for parking lots and garages because holding or staging areas for ride-hailing vehicles, bikes, scooters, autonomous vehicles, and electric vehicles are still necessary if congestion and on-street parking are to be controlled.
  • Electric vehicles, bikes, and scooters require charging stations, ride-hailing vehicles waiting for their next fare need staging locations, and autonomous vehicles need holding areas where they can be cleaned and serviced.
  • The traditional parking model will soon disappear, but this does not mean that the parking industry will die. To survive and grow, parking lots and garages need to adapt to changing urban mobility needs.
  • FlashParking, a parking management company, believes that by converting parking garages into “urban mobility hubs,” operators and managers of parking lots and garages can be part of the solution to the urban mobility problem.
  • SpotHero, a parking inventory and booking startup, and Walmart are examples of companies that have made adjustments to adapt to urban mobility trends. SpotHero has recently equipped its parking garages with sensors so they can accommodate driverless cars, while Walmart has recently installed charging stations in its parking lots to accommodate electric vehicles and promote sustainability.

Market Trends

The future-proofing of parking garages, the conversion of parking garages into staging locations for e-commerce orders, and the development of autonomous- and electric-vehicle-ready parking lots and garages are three trends in the United States market for parking lots and garages.

Future-Proofing of Parking Garages

  • Because of the growing adoption of car-sharing and ride-sharing services such as Uber and Lyft, there are expectations that the people who avail these services will soon be discouraged from buying their own cars. Car ownership, once significantly reduced, will then result in reduced demand for parking lots and garages.
  • The fact that the United States currently has 2 billion parking spaces for only around 250 million cars suggests that parking lots and garages are already under-utilized. Given the projection that private car ownership will decrease by 80% by 2030, and that the number of passenger vehicles will decrease by 203 million between 2020 and 2030, the situation is expected to only get worse in the coming years.
  • Many ride-hailing users, especially the younger ones, have already started questioning their need to own a car. Fifty percent of ride-hailing users in the United States report that the proliferation of pay-per-use mobility options has prompted them to reassess this need.
  • An urban planning expert believes parking lots and garages can counter the negative effects of reduced car ownership by positioning themselves as pick-up or drop-off hubs for transportation network companies and for micro-mobility units that people can use for first- or last-mile connectivity. This move can help decongest streets and minimize on-street parking (e.g., dumping of personal mobility devices such as bicycles and scooters on streets).
  • To prepare for reduced car ownership, however, developers such as Camden Property and AvalonBay Communities are turning to future-proofing for adaptive reuse. With an eye to a future dominated by ride shares, car rentals, and autonomous cars, both developers have recently built apartment buildings with adaptable or convertible parking garages.
  • Though the adaptable garages required thick flat floors and were more expensive to build, they can be easily modified for other uses when parking spaces are no longer in demand. They can be converted into apartments, shops, offices, gyms, or studios.

Conversion of Parking Garages into Staging Locations for E-Commerce Orders

  • More and more people are shopping online and expecting complimentary shipping and quick deliveries. E-commerce’s share of retail sales in the country is expected to rise from 16% to 25% by 2026.
  • Logistics infrastructures, supply chains, and transportation networks, however, are not adequately equipped to handle the rapid growth of e-commerce.
  • This “Amazon effect” or rise of e-commerce is opening up opportunities for the parking industry. Operators or managers of parking garages can offer some or all of their space as staging locations for first- or last-mile freight or package deliveries.
  • As they are located in prime locations, underground parking garages are suitable spaces for storing and fulfilling e-commerce orders. They can be used to reduce the congestion brought about by delivery trucks.
  • Real estate company JLL is an example of a company that is at the forefront of this trend. It is repurposing an under-utilized parking garage in downtown Chicago into a logistics facility for last-mile deliveries.
  • Located beneath Millennium Park, the parking garage will be used as a staging facility for delivering e-commerce orders and replenishing inventories of nearby stores.
  • JLL believes that by converting its under-utilized parking garage, it will be able to achieve higher revenues and better utilization rates.

Development of Autonomous- and Electric-Vehicle-Ready Parking Lots and Garages

  • With the cost of electric vehicle batteries dropping, electric cars are emerging as the next big thing in the automotive and mobility industries after car-sharing and ride-sharing services.
  • Since electric cars need to be recharged, they present an opportunity that parking lots and garages can take advantage of. Gas stations may not be able to capture all the demand for electric-vehicle charging stations, so parking lots and garages may consider adding electric-vehicle charging stations as a value-add service.
  • The proliferation of driverless vehicles appears imminent too given that several automotive manufacturers are planning to produce these vehicles in the near future.
  • With autonomous vehicles being able to park on their own, it is likely that autonomous vehicles will park in “urban edge” areas, and that parking garages in urban areas will be redeveloped for a different purpose. Operators of parking facilities will likely reassess the width of their parking spaces, and the lighting, ventilation, and connectivity of their facilities.
  • SpotHero, a Chicago-based startup that provides parking inventory and booking services, seems to be ahead of its peers in preparing for a driverless future. It recently announced that over 500 of its parking garages in the city have been equipped with sensors such as connected parking meters and license plate scanners to accommodate self-driving vehicles.
  • In line with its sustainability initiatives, Walmart has recently installed more than 300 electric vehicle chargers in its parking lots.

Market Segments and their Corresponding Market Sizes

The market for parking lots and garages in the United States is divided into seven segments, namely, central business district (CBD) or private parking, off-airport parking, on-airport parking, college and university parking, hotel parking, hospital parking, and government-owned or municipal parking. The estimated sizes of these segments are $4.51 billion, $1.32 billion, $1.32 billion, $1.54 billion, $1.1 billion, $660 million, and $550 million, respectively.

Market Segmentation

  • IBISWorld appears to be the only source in the public domain that details how the market for parking lots and garages in the United States is segmented. Both Nuveen, an investment management company, and City Tech, an urban solution accelerator, have published materials indicating that IBISWorld reports on the segmentation of the market.
  • Though IBISWorld itself has not made the market segmentation publicly available, Nuveen has shared what it has learned from IBISWorld’s report.
  • According to Nuveen, IBISWorld’s report shows that the market for parking lots and garages in the United States is divided into the following four segments: central business district (CBD) or private parking, airport parking, non-CBD parking, and government-owned or municipal parking.
  • Airport parking is divided further into off-airport parking and on-airport parking, and non-CBD parking is divided further into college and university parking, hotel parking, and hospital parking.
  • Though there are a couple of estimates of the size of the United States parking lot and garages market in the public domain, particularly those released by IBISWorld and Kentley Insights, it makes better sense to use the market size provided by IBISWorld in the determination of the segment sizes. After all, it was IBISWorld that has released information on market segmentation.
  • IBISWorld estimates the current size of the United States parking lots and garages market at $11 billion, while Kentley Insights estimates it at $13.1 billion.
  • The International Parking Institute reports that the United States parking industry generates around $30 billion in revenue each year, but it is possible that this higher amount is inclusive of other revenues that are not directly generated by parking lots and garages.
  • As the latest available data on market segmentation was for the year 2017, an assumption was made that there have been no significant changes in market segmentation between 2017 and 2020.
  • The size of each market segment was determined by multiplying the market size of $11 billion by the market share of that segment.

CBD or Private Parking

  • CBD or private parking caters to “parkers in urban downtown cores.” Local visitors, office workers, residents, retail shoppers, and tourists are among the parkers served by this segment. Parking for restaurants, apartment buildings, and entertainment venues are included in this segment.
  • CBD or private parking accounts for around 41% of the $11-billion market for parking lots and garages in the United States.
  • This market share translates to a segment size of around $4.51 billion.

Off-Airport Parking

  • Off-airport parking caters to travelers who seek discounted or lower parking prices. Operators of this type of parking typically use shuttle buses to transport travelers from the off-airport parking space to the airport.
  • Off-airport parking accounts for around 12% of the $11-billion market for parking lots and garages in the United States.
  • This market share translates to a segment size of around $1.32 billion.

On-Airport Parking

  • On-airport parking caters to travelers who wish to park closer to the airport and are willing to pay a higher parking price.
  • On-airport parking accounts for around 12% of the $11-billion market for parking lots and garages in the United States.
  • This market share translates to a segment size of around $1.32 billion.

College and University Parking

  • College and university parking caters to faculty, staff, and students.
  • College and university parking accounts for around 14% of the $11-billion market for parking lots and garages in the United States.
  • This market share translates to a segment size of around $1.54 billion.

Hotel Parking

  • Hotel parking caters to travelers.
  • Hotel parking accounts for around 10% of the $11-billion market for parking lots and garages in the United States.
  • This market share translates to a segment size of around $1.1 billion.

Hospital Parking

  • Hospital parking caters to medical employees, hospital staff, and patients.
  • Hospital parking accounts for around 6% of the $11-billion market for parking lots and garages in the United States.
  • This market share translates to a segment size of around $0.66 billion or $660 million.

Government-Owned or Municipal Parking

  • Government-owned or municipal parking caters to “parkers in urban downtown cores.”
  • Government-owned or municipal parking accounts for around 5% of the $11-billion market for parking lots and garages in the United States.
  • This market share translates to a segment size of around $0.55 billion or $550 million.

Market Segment Insights

Statistics suggest that the distribution of buildings and new construction spend by building type may be the reason the market for parking lots and garages is segmented the way it is. The parking revenues the market segments are able to generate are largely affected not by payment and space issues but by the rise of ride-hailing services such as Uber and Lyft.

Reason Behind Segment Sizes

  • The reason the segments have the proportions they have appears to have something to do with the way buildings are distributed by type and the way new construction spend is distributed across building types.
  • The latest building characteristics the U.S. Energy Information Administration has released indicates that of the 5,557,000 commercial buildings in the country, 1,012,000 are office buildings, 389,000 are educational institutions, 380,000 are food service facilities, 158,000 are lodging facilities, and 157,000 are health care facilities. Educational institutions, lodging facilities, and health care facilities are far fewer than office buildings.
  • Commercial buildings, office buildings, and multi-family residential buildings, which are typically the types of buildings that can be found in the central business district, account for most of the new construction spend in urban areas. Hotels account for only a small portion of this new construction spend.

TNCs Affecting Parking Revenue Generation

  • Transportation network companies (TNCs) such as Uber or Lyft appear to be the factor that is causing significant changes in the parking revenues of airports, bars, restaurants, and event venues. There is no clear evidence that payment levels and space are causing market segments to gain or lose revenue.
  • Airports report decreases in revenue from their parking lots and garages as a result of fliers opting for Uber or Lyft. The Los Angeles International Airport, for example, reports that while its parking revenue decreased by 5.2% in 2017, its revenue from TNCs increased by nearly 300%.
  • Dallas Fort Worth International Airport’s parking revenue in 2018 dropped by 6.3%, while the Hartsfield-Jackson International Airport’s parking revenue in Q2 2019 dropped by 2.84%.
  • The Hartsfield-Jackson International Airport intends to introduce technological improvements and dynamic pricing to encourage people to use its parking deck. Dynamic pricing means that the parking price increases as the demand for parking space increases.
  • Bars, restaurants, and event venues also see declines in parking revenues. They observe that more and more people turn to ride hailing to avoid the stress and costs associated with driving and parking.
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