Scarcity drives keen interest in city parking Author: Carolyn Cummins Commercial Property Editor Date: 24/11/2007 Publication: Sydney Morning Herald
PROPERTY companies and investors are trawling the marketplace for appropriate deals to soak up cash and generate returns, which has led many to view car parks as a viable investment opportunity.
Leading listed and unlisted property trusts are increasing their exposure to the sector, which is tightly held but generates high returns. The lack of new spaces being built in the CBD has led to better returns.
New research on the Sydney CBD car park market by Savills has led to strong interest in the sales campaign for the Sydney Opera House car park.
The Savills Car Parking white paper, which provides an interim update on official council parking figures from 2001, shows car parking additions in the CBD, especially the CBD core, have been no match for demand.
Underlining the value of such assets, Macquarie Bank paid $1.95 billion to buy the British company National Car Parks from the private equity firm 3i Group this year.
National Car Parks owns half the privately operated off-street car parks in Britain and is the second-largest provider of car parks to British airports and the largest car-park provider to railway stations there.
The bank has told property players here that it is a sector in which it is keen to expand.
Savills' former national research director, Chris Freeman, who is co-ordinating the sales campaign for the Opera House car park with Savills' director of capital transactions, Peter Whitaker, said the research highlighted why prime car parks were one of the most secure and strongly returning asset classes in commercial property.
Mr Whitaker said the expressions of interest in the car park were due on Tuesday.
He said the strong fundamentals of the Sydney car parking market, coupled with the Opera House's iconic status, had resulted in a strong level of interest from both domestic and international investors.
"Nevertheless, due to Australian buyers' familiarity with the market, it seems likely the end buyer will be a domestic group," Mr Whitaker said.
Mr Freeman said additional car park supply in Sydney, especially the CBD core, was significantly restricted by the availability of sites and the need to comply with the council's local environment plan.
"To minimise further congestion in the CBD, approvals of car bays are kept to a minimum. Because of this we have seen a net increase in public and commercial car bays in the Sydney CBD of just 916 bays since 2001, whereas from 1996 to 2001 almost 2500 bays were added," Mr Freeman said.
"Major car parks added in recent years, such as those at Westpac Place and the Ernst & Young Centre, have mainly occurred in the western and midtown areas. However, there has been a net increase of just 23 bays in the CBD since 2001 as the only development has been 126 Phillip Street with 78 car bays, and the development site already held 55 bays.
Mr Freeman said that because of this, net absorption in the CBD core had significantly outstripped car parking supply,with only one bay being added for every 3228 square-metre increase in occupied office stock, or about one bay for every215 new employees.
The white paper shows that the CBD core will continue to be the tightest sector because of the need to consolidate development sites, which will lead to net additions being minimal or even to a reduced number of spaces.
Other mooted development sites in a similar position include Investa's Kindersley House (35 bays), Mirvac's 190 and 200 George Street (50 bays), Mirvac's Goodsell Building (28 bays) and AMP's Loftus Street site (49 bays).