Commercial Real Estate Finance

Certain assets in the commercial real estate industry tend to get all the glory. Ritzy apartment buildings, class-A office towers, and state-of-the-art medical buildings are typically the properties favored for promotional materials and architectural magazines. Assets like parking garages and self-storage facilities, lacking that “trophy image,” are far less celebrated.

In fact, these humbler, more utilitarian buildings have the potential to perform just as well as their glitzier, better-known peers. Though appearance is certainly a consideration for potential tenants and customers, more practical details tend to trump those concerns. Having an extra-pretty office suite is usually less important than having a place to park.

And so we turn to the much-maligned parking garage. This urban mainstay seemed resistant to the operational innovations that have affected other areas of commercial real estate. After all, it seems like there isn’t much to improve upon: a large concrete structure, ramps, parking spaces, and a gate where you have to pay. However, the most valuable commodity in any city is space, and investors and operators are looking for ways to improve the space-efficiency of parking garages.

Brandywine Realty Trust (BDN) believes it has the answer. A couple years ago, the Philadelphia-area REIT–which operates both office and parking properties–took a shot at opening Philadelphia’s first automated parking garage, The Lift At Juniper Street. (Incidentally, this garage is right across the street from Llenrock‘s offices.)

This is still an extremely new model. Automated parking garages only debuted in the U.S. in the past decade. New York City‘s first robotic garage appeared in 2007 and The Lift opened in Philadelphia a few years later. There are only a handful of these garages in the States, located in the country’s largest and most parking-deficient cities.

This system–in which the garage is a sort of shelving-unit for cars, elevators lifting vehicles from ground level and inserting them into their own cubbies high above the ground–may be slow to catch on. Customers will need to become less apprehensive about leaving their Saab in the hands (figuratively speaking) of a machine, investors less timid about sinking millions into something so new.

Brandywine Realty, for their part, recently published a PDF outlining the advantages of the automated garage:

• Efficient use of urban space: Cuts out the extra square footage needed for ramps and drive aisles, as well as reducing electrical and other costs
• Green benefits: By eliminating the need to drive around looking for convenient street parking, automated garages help cut down on fuel-consumption and CO2 emissions
• Operational advantages: No need to maintain an elevator for customers, fewer staff needed at one time
• An established system with a proven track record: “880,000 automated spaces in service worldwide”
• Cost benefits: The increased density of this model allows greater revenue per square foot

It’s a compelling case. With their sustainability and revenue potential for operators, I’m willing to bet we’ll see many more of these garages constructed in the U.S. However, it will be quite some time before these become the industry standard. For one thing, it seems unlikely any developer could convert a traditional parking garage into an automated one. Further, the public must be convinced the technology is reliable. After all, traditional parking garages rarely do this.

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