Alternative Real Estate Investment In The Commercial Parking Industry

Submitted By electricave1109
Words: 2838
Pages: 12
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Introduction
Investors are consistently looking for the perfect investments, those that yield particularly both safety and substantial returns. To obtain both of these factors in today’s market is very possible, but how does one hedge the risk involved with obtaining such an investment. To find such growth and generous yield, we must settle for investment vehicles that are extremely risky such as indeterminate emerging markets or foreign bonds. At the same time, do these investments guarantee the safety that we as investors are comfortable having? In times of uncertainty like today’s market has bred, we must look towards alternative investments that are capable of hedging risk while yielding a more than reasonable return. One alternative real estate investment that has attracted investors for many years in the United States is the commercial parking industry.
Commercial parking as an investment is virtually a recession proof investment due to the nature of its industry. Although the industry demand is driven by the occupancy rates of commercial real estate, the need for parking will always exist as long as there are cities that breed jobs and suburbs that house workers. From the perspective of a conservative investor, investments that are safe from risk and show promise for moderate financial growth are generally very appealing. In terms of growth, the output of US parking lot and garage management is forecasted to grow at an annual compounded rate of 2 percent per year between 2012 and 2015 after a surprising growth of 5% in 2011. (First Research, 2012) Although these numbers sound relatively general compared to other industries, the growth rate of the commercial parking industry shows promise for the future. We now will look further into the details of the commercial parking industry and explore many of the essentials that prove the commercial parking industry to be one of America’s safest investments.
Overview of the Commercial Parking Industry
According to the International Parking Institute, the parking industry generates more than $25-30 billion dollars a year in gross revenues. (Institute, 2012) According to the U.S. Census Bureau, there are more than 105 million commercial parking spaces in the United States. (Institute, 2012) The commercial parking industry is greatly driven by the growth of new economic development. The construction of new hotels, commercial businesses, retail stores, condominiums, and other forms of construction significantly increase the demand for parking in major metropolitan areas. The positive and negative changes in the overall level of commercial and residential construction spending also greatly affects the demand of the commercial parking industry. (First Research, 2012) The value of US nonresidential construction spending, an indicator for parking facility demand, rose 10.0 percent year-to-date in June 2012 compared to the same period in 2011. (First Research, 2012) As the population increases and the economy continues to grow, the demand for parking is constantly increasing due to the need for parking to access these new additions to our nation’s housing and commercial real estate market.
Another factor that drives the demand of the commercial parking industry is the lack of public transportation in many of our major U.S. cities. The unwillingness to pay high prices for public transportation and the lack of public transportation causes more people to use their automobiles for personal transportation. This increase causes a shortage for parking in major metropolitan areas. Records show that there were almost 59,000 autos tire-booted in Chicago in 2007, and the number has probably doubled that by now. With the amount of illegal parking that is going on in Chicago and other major U.S. metropolitan areas, it’s clear that the demand for parking is growing. (Cherrist, 2008) This shortage in public parking causes the demand for parking to rapidly outpace the supply available. In 2007,
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