Monthly contracts at 62% of the spaces, or let the lot float on transient

Question

I've owned an 88-space lot two blocks off a core business district for four years. Right now 55 spaces are on monthly contracts at $145, and the rest run transient off a kiosk. The monthly side is boring money, it collects itself, and my collections loss last year was under $400. The transient side did about $19 per space per active day on event nights and something closer to $6 on a random Tuesday.

Run the transient numbers out over a year and the per-space revenue beats monthly by roughly 20% in a good year. Run it out over a bad stretch, a construction detour, a slow event calendar, and it loses to monthly badly. I've had both.

The part I keep circling is that contracts are also a constraint. If the parcel gets a serious offer or I want to take it to a higher use, 55 signed agreements is a delivery problem, and month-to-month terms cost me pricing certainty in exchange for flexibility.

So where do you sit on the mix, and does the redevelopment angle change your answer or not?

renee_dubois · Answer

I'd go heavier on monthly than you are. My multifamily instinct is that predictable base rent is what lets you survive the bad quarter, and $145 times 55 arriving on the first of the month is the closest thing parking has to that. The transient upside you described only shows up in a good year, and you don't get to pick the year. Where I'd push you, thicket, is the $145 itself. Four years in a core district and you're still at $145? That number sounds like it hasn't been tested lately.

nicole_adeyemi · Answer

cairn is right about the rate but I'd answer the structural question differently. If you think the real value in that parcel is the dirt, every contract you sign on a long term is a small mortgage against your own flexibility. I keep my lot agreements month to month with a short notice period for exactly that reason, and I eat maybe 8% less revenue for it. Delivering a vacant, unencumbered lot is worth more to a buyer than the extra income, in my experience.

How the agreements get characterized matters too, a license to park versus a lease can read very differently, and that turns on state law and the actual document, so that one is a question for an attorney in your state rather than for us.

Monthly contracts at 62% of the spaces, or let the lot float on transient

2 replies