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With interest rates anticipated to rise yet again in June, many Aussie investors continue to search for alternative investment pathways that will see genuine return, whether that’s through capital growth over time or immediate cash flow opportunities.
As many businesses start returning to their central business district offices, a sneaky investment opportunity has arisen for savvy buyers – and you’d better put your foot on the accelerator because it won’t be in demand for long: car parks.
Recent office-data reports reveal that most of Australia’s major CBDs are back to 50 per cent office capacity, and I predict this will grow to almost 100 per cent by 2023 – making car parking blocks and individual spots a profitable investment opportunity.
As a commercial property investment, car parking has literally no barrier to entry and has low CAPEX, as well as very minimal ongoing maintenance.
Since COVID-19 has become more endemic, businesses have been returning to their normal office lives; however, many employees are still quite sceptical of public transport and exposing themselves. Thus, we are already seeing many individuals opting more and more to drive to work – particularly if they only need to do so two to three days per week.
The impact of the SARS virus in China led to an immediate explosion of the motor industry, and I predict a similar pattern to occur here in Australia. As a result, parking spaces will become more in demand than ever before. So, if you’re thinking of investing in a car space (or may already have access to one), here are some of the best ways you can maximise its value.
For owners
If you currently own a business that has excess car spaces, my biggest encouragement would be to hold onto it and lease it out. By doing so, you can charge upwards of $10,000 per year to lease that spot to someone in your building. If you are unsure on how to lease this out, speak to your real estate agent or strata management company and they can help you source a tenant. They are in demand right now, so make sure you haggle for the best price.
For investors
While car spaces might not be the best investment for those who already have a property portfolio or seeking high yields, for first-time buyers or those just getting started in commercial property – it is a highly beneficial option. Car spaces have very little barriers to entry and are highly affordable – starting at around $40,000. However, the closer you get to major CBDs, this price can increase considerably. Whether you’re buying the car space for yourself, or to lease out, this will always work out cheaper in the long run, as opposed to organising an annual spot within a Wilson’s Parking, for example.
My top tips?
- Compare Leasing
Comparing leasing across various suburbs is essential to ensure that you’re not paying a premium on a particular car space. Marketplace apps like Spacer provide comparative information for prospective investors across all states, including lease values. - Look at parking rates
If it costs you X amount of dollars to rent a car space per month, work out if it is cheaper to buy one. If it is, then you have an asset! And if you have your own business, it is an expense you can write off, so it becomes a win-win. - Location, location, location
Unlike other commercial properties where you can have a destination tenant (like Bunnings, medical centres), the location of the car space is important for capital growth but also for continuous leasing and increased leasing rates in the future. Make sure you buy a car space in a key location so you can either use it yourself or so that you can lease it out for a higher rent, as it is in demand in other office blocks with lots of work returning to CBD areas.
Helen Tarrant is an author and the founder of Unikorn Commercial Property.
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