Monthly contracts looked like safety until the hospital built its own deck
A surface lot near a medical campus used to be the easiest underwrite in parking. Captive demand, predictable monthly contracts, low turnover, and a building that costs nothing to maintain. The assumption baked into almost every deal near a hospital or university was that institutional demand is durable demand, and for a long time that held. The problem is that institutions build. A hospital that leases 60 spaces in a nearby lot at $130 a month is paying $93,600 a year for a problem it can eventually solve with a structured deck of its own, and once the deck opens the contracts cancel inside 30 days because almost every standard monthly parking agreement is terminable on short notice by the parker, not the owner. The lot owner carries all the demand risk and almost none of the upside if rates rise, while the anchor tenant can exit the moment a cheaper or more convenient option appears. A case worth studying: a 48-space lot bought at a 6.8 cap rate with 40 monthly contracts to hospital employees, $128 per space per month, clean numbers on paper. Eighteen months later the hospital opens a connected garage and 34 contracts cancel in the same week. The remaining income supports roughly a 3.1 cap at the original purchase price. The exit becomes a land question, not an income question. What changes the underwrite is asking who can make your demand disappear and how long it would take them to do it, before you close on the income story. So I want to know what the room treats as genuinely durable parking demand versus demand that just feels durable because it has been stable so far.
