Investing in Car Park Spaces as a Smart Investment Option

Investing in Car Park Spaces as a Smart Investment Option

The Reserve Bank's recent decision to hold the Official Cash Rate (OCR) steady at 5.5% is a significant move that has instilled confidence in economists and the public, signalling a stabilising market. Infometrics forecasts that the Reserve Bank will initiate a series of OCR cuts starting from August, as the easing population growth alleviates labour market pressures and wage growth, thereby driving annual inflation back to its 1-3 percent target.

While buying a 15 square metre car park may not seem like the most glamorous commercial investment, the benefits of purchasing one, often at a modest entry price, are heralded by those who have.

With land prices in the main centres rising rapidly, the return on investment for a car park compares favourably with those of a more mainstream commercial and industrial property class. Car parking in the main cities is already at a premium, and with Councils removing more and more on-street car parks in favour of new office and apartment buildings and pedestrian zones, the demand for inner-city car parking spaces is only going to increase.

Purchase prices for inner-city car parks can range from $75,000 to $265,000. Recently, car parks in the Sebel Quay West building in Albert Street, Auckland, were selling for between $120,000 and $125,000. 

So why is buying a car park seen as a sound investment? Lance Judson, Commercial General Manager at Property Brokers, says, "Car parks are a relatively safe, simple, and reliable investment. They are a low-stress investment and can net a return of anywhere between 4%- 6%. Due to the lower entry price, a car park can pay itself off in under 15 years."

There are seven potential key advantages of buying a car park:

• Lower entry cost: Buying a car park can be more affordable than other types of real estate, especially in prime locations. This lower entry cost can make it easier to get started in commercial real estate investment. 
• Steady income: Car parks can provide a steady income stream through parking fees. If located in a busy area with high demand for parking, you can generate consistent cash flow with long-term leases. 
• Low maintenance: Compared to other types of real estate, car parks generally require lower maintenance costs. There are no tenants to manage, and maintenance is typically limited to basic upkeep.
• Low vacancy risk: Car parks tend to be less likely to remain unoccupied for extended periods. People will always need parking spaces, especially in busy areas.
• Potential for appreciation: If the area where the car park is located experiences growth or development, the value of the parking space will appreciate over time, providing a potential capital gain. 
• Tax benefits: Depending on the jurisdiction and the leasing entity, tax benefits may be associated with owning and operating a car park, such as deductions for maintenance expenses and depreciation.
• Diversification: Adding a car park to your investment portfolio can help diversify your investments, spreading risk across different asset types.

"However, like any investment, there are risks associated with buying a car park.  Fluctuations in demand, regulatory changes, and potential competition from other parking facilities. Conducting thorough research and due diligence is essential before making any investment decision."

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