How much should parking cost?
A recent story in the New York Times describes a 10-unit luxury condo building in New York’s Soho district. Parking is so scarce that the developer is asking $1 million for a single parking spot. The living units upstairs will cost between $8 and $13 million, so the buyers can probably afford the additional expense. But $1 million seems outrageous. At that price, the parking spot costs over twice what the living space goes for, on a per-foot basis.
But what is anything worth? Private parking spaces are rare in Manhattan, and their number has been falling. And it’s especially hard to find parking in Soho. There are few to no public parking options, let alone a reserved spot in your own building. To build the 10 spots, the developer had to get a special exception.
Photo: ProjectManhattan. Source: Wikipedia
Parking goes for a premium in other cities. Last year, a tandem space went for $560 thousand in Boston’s Back Bay neighborhood. Time is money. It could save a lot of time to have a spot that’s always available. If someone’s income is high enough, the spot can pay for itself.
Economically, an item’s value is determined by the cashflow it can generate over time. A story in the Book of Genesis tells of Abraham haggling over the price of a burial plot after his wife Sarah dies. He ends up paying a king’s ransom, but maybe that land was especially productive, or perhaps it had mineral resources. It’s possible the spot was strategically important. We don’t know enough now to determine if the asking price back then was fair. All we do know is that Abraham was willing to pay it.
Today, though, even someone who can pay $10 million for an apartment might find a million bucks for parking little steep. Maybe the owners would consider $950 thousand–for a spot next to the dumpster.
Douglas R. Tengdin, CFA
Chief Investment Officer