There's a reason the developer makes parking as expensive as they do, it's because they don't want to build it. Demand has absolutely nothing to do with the amount of parking they will build as the cost per level is astronomical and they would rather sell less than more.^The developer would build parking if there is demand for it but there isn’t as much demand at the price required to provide them.
There's a reason the developer makes parking as expensive as they do, it's because they don't want to build it. Demand has absolutely nothing to do with the amount of parking they will build as the cost per level is astronomical and they would rather sell less than more.
To be clear, this statement is a non-sequitur.
Demand refers to the demand that would exist, if the developer charged for the cost of constructing the parking, along with a mark-up comparable to that applied to residential units above grade.
Developers would go bankrupt if they built things and didn't charge that cost to the buyer.
Its certainly true that if developers opted to give parking away with the unit that demand for parking would rise.
However, they would have to add that cost to all the units in the development, with those w/no parking subsidizing units that had same; and it would all come out in the wash, except that with more expensive units, fewer would be built.
As it stands, demand for parking in many locations is low, yes, in part, because the price of parking is high. But again, there is no system under which the buyer doesn't pay for said parking, its only the how that changed.
If developers charge what it actually costs to produce one parking spot, nobody would buy parking. I've sold many sites that had high demand for parking in which the builder did not change plans to add. Had one developer add $50,000 to the cost of parking pushing it to $125 k just so nobody would purchase any additional.To be clear, this statement is a non-sequitur.
Demand refers to the demand that would exist, if the developer charged for the cost of constructing the parking, along with a mark-up comparable to that applied to residential units above grade.
Developers would go bankrupt if they built things and didn't charge that cost to the buyer.
Its certainly true that if developers opted to give parking away with the unit that demand for parking would rise.
However, they would have to add that cost to all the units in the development, with those w/no parking subsidizing units that had same; and it would all come out in the wash, except that with more expensive units, fewer would be built.
As it stands, demand for parking in many locations is low, yes, in part, because the price of parking is high. But again, there is no system under which the buyer doesn't pay for said parking, its only the how that changes.
If developers charge what it actually costs to produce one parking spot, nobody would buy parking.
I've sold many sites that had high demand for parking in which the builder did not change plans to add.
Had one developer add $50,000 to the cost of parking pushing it to $125 k just so nobody would purchase any additional.
Not swinging wildly at all. As for how they were going to add, it was more about subtracting, if the site was designed with three levels of parking they would do everything they could to try and eliminate a level by raising pricing on parking so in order not to have to build it based on demand. Also, sales happens long before shovel gets in the ground, if the demand was high enough and the pricing was where buyers wanted it, they'd be able to revise the site plan application and add another level of parking provided the site could handle it. The site I referenced began sales in 2014, they just closed in July 24. They weren't going that great, It was a location of high value and most buyers were asking for second and third spots, builder wanted nothing to do with it due to cost, location could handle additional levels.If this is true, then parking demand is zero. I think you're swinging to widely.
How were they going to add parking, if they had a finished design, costed, to a certain height and depth and approval for same? Clearly, they would have to resubmit to the City and add an additional underground level. This has a wide range of significant cost impacts.
First, it delays any potential construction while resubmission/variance and re-design take place.
Second, unless you're certain you will sell the additional parking created by a full additional floor, you're now going to have surplus spaces you can't sell, which means you have to recover that cost elsewhere.
Third is the absolute cost of 'simply' adding one underground level to a design.
Fourth is the accretive or additional cost that may occur when you go deeper, there are implications for instance if you go below the water table in terms of not only waterproofing the garage/foundation, but also de-watering costs during construction.
There may be additional structural costs as well, as the new level now has to support one more level that the previous basement level did.
This is not why they raised the price, they raised the price because people were willing to pay it, and it drove revenue to the topline and profit to the bottom line.
Clearly, in your example, the developer mis-estimated demand. But not so much that it made economic sense to delay the project while another level of parking went through design, and approval and added construction costs and delayed sales.
Sales of units were clearly going well enough that a shortage of parking was not material to the success of the project, it merely made the parking more profitable.