Why community managers are leaving free parking behind

July 25, 2024

TABLE OF CONTENTS

Residents love free amenities, right?

While that may be true, when it comes to parking, “free” can lead to a number of problems for your apartment community.

There’s no better example of this than free parking at multi-family properties. What many property managers see as a way to keep residents happy and make things simple can quickly spiral out of control, creating a mess out of your parking situation. 

And while many property managers fear the backlash from residents if they start charging for parking, especially when their existing systems are already messy and inconvenient, charging for parking may even be the solution to their problem, not an accelerant like they may think. 

In fact, a recent study found that 42% of respondents would actually be receptive to unbundling parking from rent and assigning a separate fee. So it's not just property managers and owners who want to ditch free parking, many residents are calling for it, too.

Here’s where free parking goes wrong, and how it may be making your job as a property manager more difficult than it needs to be. 

Inflated rent prices

In reality, free parking isn’t really free. It can actually be quite expensive

The costs associated with maintaining parking facilities — like upkeep, security, and management — are steep. When parking is provided at no direct cost to tenants, these expenses are typically absorbed into the overall rent price. 

These hidden costs mean that residents without cars are effectively subsidizing a service that they don’t use. This contributes to a decrease in affordability across the board, making affordable housing less accessible to those who rely on public transportation, biking, or walking. And leading to a lot of frustration, too. 

To illustrate how real of an impact this makes on rent, research found that when garage parking was bundled with the cost of rent, on average, it led to a $1,700 increase per year.

“The cost of bundled garage parking for renters is approximately $1,700 per year, and the bundling of a garage space adds about 17% to a unit’s rent.”
– C.J. Gabbe, Santa Clara University

Charging for parking makes these costs explicit and makes sure that only those who use the parking facilities shoulder the costs. This approach can lead to lower overall housing costs for tenants who do not require parking. 

A more affordable base rent — with optional parking — can also help drive occupancy. It can attract tenants with more diverse priorities, such as those who use public transport, favor biking or walkability, or value savings over owning a vehicle.

“In the absence of paying for an unused parking space, these rent outlays could be applied to renting a larger or better-located unit, other consumer spending, or saving for a home purchase.”
– C.J. Gabbe

Missed revenue

It’s clear why some renters may not be crazy about free parking when they see the impact of the hidden costs, but there’s also a negative impact on your property’s bottom line. 

Charging for parking creates a substantial additional income stream that can support parking maintenance as well as other upgrades and new additions to the property overall. We see properties earn anywhere from a couple of thousand dollars to tens of thousands of dollars every month from parking alone. 

When parking is bundled with rent, the associated costs are hidden, but unbundling these costs makes them explicit and manageable. 

Kri, a property manager at Tailor Lofts in downtown Los Angeles, mentioned an unexpected bonus of unbundling parking and charging in a separate system. Even when tenants couldn’t pay rent, they still paid for parking:

“We used to have the parking grouped in with the rent, so if rent didn’t get paid, we didn’t get anything. But now people always make sure to at least pay for their parking, because they don’t want to lose their spot.”

You can also use more flexible pricing models that take into account the length of the parking lease, location of the spot, parking amenities (like EV chargers or covered), availability, and demand. This flexibility helps you optimize revenue, which almost always more than makes up for the decrease in rent price. 

So it’s a win-win. People are drawn in by the lower base price for rent, and you bring in more money every month by unlocking an additional revenue stream. 

Kurt Nordback, a property owner that we spoke to, pointed out that there's another valuable resource that free parking deprives you of: Data.

"Parking has a real cost, and bundling it and hiding the cost results in various kinds of market inefficiencies and negative externalities."

When you separate out your parking revenue from the rest of your revenue, it helps you make sure that costs and being properly offset by profit, giving you more ammo for strategic decisions.

Operational challenges

One of the primary operational issues associated with free parking is inefficient space utilization. 

Most often, we see properties face parking shortages when they offer free parking. Few people are going to turn down a free amenity, so you’re likely to see many more people using a spot they may not truly need, such as letting friends park, parking an inoperable car, or even just storing a car they never use. Especially when you’re tight on parking spaces, free parking can be a nail in the coffin. 

The team at La Galleria experienced this phenomenon from providing “free” parking that was bundled into rent. 

“Parking was a nightmare. We allocated one free parking spot to each unit, but that left us with problems when guests, staff members, and residents with multiple cars had nowhere to park,” Mariana Salfiti, La Galleria’s general manager told us. 

When residents can park for free, you’re also more likely to see underutilized or mismanaged parking areas, with some spaces remaining empty while others are overcrowded. Essentially your “free” parking turns into a chaotic free-for-all. This is likely to lead to disputes among residents, complaints to your staff, and disproportional wear and tear. When you assign a fee to parking, and especially when you use a more dynamic pricing strategy, it helps incentivize people to grab up some of the less desirable spots for a lower price. 

Free parking also raises administrative burdens. Managing a large number of parking spaces without a fee structure requires more administrative oversight. Property managers have to track and monitor parking usage, enforce parking regulations, and resolve tenant disputes over parking. This increased administrative workload can divert attention and resources away from other essential property management tasks, reducing overall efficiency of your team.

Environmental and social impact

For property management companies that hold sustainability and social impact as core to their brand values, free parking can cause some dissonance. 

When you offer parking for free, it encourages more car dependence and makes it easier for residents to say no to other more sustainable transportation options, like walking, biking, or bussing. 

This has an environmental impact as it contributes to more fossil fuels, but it also has an impact on community dynamics. Although your property may just be one in a neighborhood of many others, if every property encourages more car usage, it has a cumulative effect on neighborhood walkability as well as social interactions between those in the community. 

In conclusion: Charging separately for parking can be in everyone’s best interest

While paid parking may seem like a favor to your residents and a shortcut to making parking “simple” for your staff, it often does more harm than good. 

By assigning a fee to parking, based on current demand and fair market values in your area, more often than not, everyone wins. Your residents with cars get the parking that matches what they care about most (whether it’s budget, convenience, or amenities), your residents without cars no longer have to subsidize amenities they won’t use, and your property team benefits from a more profitable and smoothly-operating parking system.

Interested in taking the next step in parking management? See how Parkade can help put your parking operations on auto-pilot

Follow us on social:

More from the Blog

How to reduce operating expenses at your multi-family building

With rising costs in the industry, it’s becoming increasingly important to find ways to cut down on expenses. Check out these tips from our experts.

Read Story
The 5 fastest-growing areas in proptech for apartment property management

Over the past several years, there’s been an explosion of innovation in the property technology space, also known as “proptech.” Here are the top 5 areas to keep your eye on.

Read Story
Expert advice on making the transition from bundled to paid parking

With a little strategic change management, you can minimize the hiccups and get more residents to buy-in to the value of paid parking more quickly.

Read Story

Want to learn more about Parkade?

UNLOCK THIS POST

Want to keep reading?

Almost there!

Success! Your content will unlock momentarily.
Oops! Something went wrong while submitting the form.
BlogParking Management Software ROI

Investigating the ROI of parking management software

With parking being one of the largest drivers of ancillary revenue at multi-family properties, it's imperative to get it right. But just how much return can you expect from parking management software? Read on to find out.

Published: August 7, 2024
Hannah Michelle Lambert
Content Writer
Boosting ancillary revenue is often a major focus for property managers and owners alike.

Especially given that the baseline forecast for rent growth is slightly lower this year than average (2.5% versus 2.9%), properties are increasingly looking for ways to raise their bottom line without compromising the quality of living for their residents. 

One often overlooked but significant opportunity lies in parking. If managed well, it’s a potential treasure trove for additional revenue. But that’s only if it’s done well. 

Parking tends to be one of the biggest thorns in the side of a property manager. Because traditional systems — like spreadsheets and rentable items — are not built to handle tenant parking efficiently, teams aren't able to reap the full benefits parking has to offer as an ancillary revenue source. As soon as a team makes the decision to invest in a proper parking management system, the benefits often more than pay for themselves.

In this guide, we will explore those benefits, touching on both the financial and operational upside of a solid parking management strategy.

We’ve combed the data from all of our clients to identify the exact numbers to prove that there truly is ROI in parking management systems like Parkade. 

Understanding parking management

Before we dive into the numbers, let’s first establish a baseline of what exactly parking management entails. As any property manager will tell you, it involves much more than just hanging a tag on a resident’s car and calling it a day.

The key components of a parking management system are:

  • A system of record to track parking assignments, lease lengths, vehicle details, and parking prices, ideally integrated with your PMS.
  • An enforcement strategy that ensures parking rules are clear and establishes consequences (typically fines or towing) when someone breaks them.
  • A method to pay for parking, whether it’s bundled in with rent (which we don’t recommend) or paid for in a separate system.
  • A self-serve system for residents and guests to book long or short-term parking. 
  • If there is a gate on the property, provisioning and deprovisioning of gate entry should also be considered in the parking management strategy. 

The old-school way of addressing these needs isn’t cutting it anymore. Many properties are still using manual processes, like an Excel spreadsheet, rentable items, or even a physical piece of paper to keep track of their parking. 

And far too often, properties are relying too heavily on staff members to handle parking matters that take up a significant amount of time, like enforcement or guest parking.

Moreover, there’s one point that just can’t be ignored: If you’re still using old-school parking management systems like spreadsheets and rentable items, you’re leaving money on the table. 

So the parking management we’re discussing here that delivers positive ROI is a technology-led solution that automates all aspects of parking operations, improves resident experience, and unlocks new revenue streams.

Setting the stage: Residents value good parking

Delivering on resident expectations should be a main priority for any multifamily property, and parking is one area of the resident experience that is especially critical to consider here. 

65% of property managers cite parking as a top concern among residents. Whether it’s for existing residents or prospective residents, providing a simple, reliable, and flexible parking solution has a direct impact on the success of your property. 

Part of this is due to reputation. Properties have reported a 44% increase in their reputation scores after fixing their parking problems. And this boost in a reputation score can trickle into several different areas, boosting not only the number of new residents, but also leading to more renewals from existing residents.

But we know you want the hard dollar amounts, so let’s talk more about some real-world outcomes that Parkade's parking management software delivers. 

So, what do the numbers say about the ROI of parking management software?

Long-term net parking revenue for stabilized buildings

Once properties implement a system to help them optimize pricing and management of long-term parking, they see immediate gains in their long-term parking revenue. The average 6-month increase in net long-term parking revenue for the cohort of 7 properties we sampled was 24%, translating into thousands of extra dollars. 

Long-term net parking revenue for lease-ups

Better parking management also empowers properties to far outperform their projected revenue from long-term parking when they’re in the lease-up phase. 

On average, properties from the cohort we sampled estimated that they would bring in $15,925 on average from long-term parking revenue per month. But thanks to Parkade helping them optimize their parking strategy, better enforce their parking rules, and keep a better record of who is parking where, the average revenue from long-term parking was $23,450 on average, which is a 47.3% increase from the estimates in their pro forma. 

Total net parking revenue for stabilized buildings

For buildings that are already at full occupancy, the average increase in parking revenue sits at 31% once they implement Parkade’s parking management solution. 

Revenue metrics for lease-ups

The best time to implement new parking management systems is at the inception of the building. Getting parking right from the beginning ensures that you are maximizing total parking revenue from day one, as well as establishing a positive reputation around parking. Many properties underestimate the revenue from long-term parking and may often leave out potential short-term parking revenue altogether. 

When a few properties we worked with during this phase were estimating parking revenue at the start of their lease-up, they estimated around $35,000 on average. But the results, since they decided to go with Parkade right from the start, blew those numbers out of the water. In reality, they were able to bring in closer to $58,000 on average, which is a 66% increase from the estimates.

Short-term parking: An opportunity

The boost in revenue continues to be apparent when you zoom out to look at short-term parking, too. Short-term guest parking can be one of the most underutilized revenue streams, and represents a huge opportunity for multi-family properties to tap into. However, it's historically been very difficult or impossible for properties to see this revenue without parking management software that automates the process.

Especially in popular areas, like city centers or near shopping malls and sporting arenas, there’s often a high demand for short-term parking. When properties put a system in place to monetize this guest parking, they can unlock hundreds or even thousands of extra dollars per month. 

Automating guest parking

Without a good system in place to manage parking, many properties often leave guest parking as a free-for-all (meaning they don’t make money from it), or if they do attempt to monetize guest parking, it turns into a massive beast to handle. 

Erica, a property manager at Thrive Properties, told us about her pre-Parkade experience with guest parking, preventing them from delivering on a key resident need: “There was no world where we were doing short-term parking by the hour or even by the day because there was just no way to manage that.”

If you have a complicated or inconvenient system for guests to reserve parking, especially one where they have to walk into the office during office hours, guests are often more likely to try to get away with not paying for parking. (And if you don’t have a great system to enforce parking, they may very well get away with it).

With the right parking system, you’re able to give guests a flexible, 24/7 solution, removing any previous barriers that may have caused them to break the rules out of convenience. 
Maximizing guest parking availability

Another way that manual parking management may stand in the way of effectively monetizing guest parking is the inability to accurately track how many spots you have available for guests to reserve in the first place. 

Taylor, the property manager at Strata and Venue, shared her experience of desperately needing more guest parking and discovering they had a full 50 more open spots than they thought. 

“We actually had way more spots that we could have used for guest parking, but we didn’t know that because of the way we were using our parking system. Not to mention, we wouldn’t have the system to leverage them without a Parkade.”

When your parking management system gives you an accurate, real-time view of available spots, you can leverage guest parking to its full capacity.

Utilizing idle parking spots

A reliable parking-management system also allows you to make the most use of every single spot available. With technology that uses smart inventory management, properties can release idle or unassigned parking spots into the system for short-term use. So spots that would have otherwise been sitting empty between leases can suddenly be leveraged as an extra revenue-generating spot in the meantime. 

Net revenue for short-term guest parking

When properties have a great system to implement paid guest parking, without putting too much strain on their staff, they immediately see a boost in revenue.

They’re able to turn an operation that was perhaps bringing in no money — or some revenue, perhaps at the expense of staff time —  into a significant revenue source with little-to-no staff involvement. 

On average, Parkade customers experience a 303% increase in their guest parking revenue after Parkade fees. And there were some properties that saw almost a 400% increase.

Opex (operational expenses) savings

When handled manually, parking management can steal hours from on-site property management teams every week. Between fielding requests or complaints from residents, tracking down parking records, walking the lot to enforce rules, handling guest parking, and manually inputting rentable items, parking can quickly balloon into one of the most time-consuming tasks for staff.

Parking management software can automate away a lot of the most tedious aspects. For example, Parkade gives residents self-service access to reserve and pay for parking (while allowing for any rule sets the property wants to enforce), provides hands-off enforcement support, and even automates gate access via the app so that teams don’t have to worry about distributing or replacing clickers. 

Properties have seen that the time teams no longer spend on parking leads to a direct decrease in operational expenses. As a result, they can redistribute those team members' time to more meaningful tasks.

On average, we’ve seen properties decrease their operational expenses by $60,000-$100,000 from savings on parking operations alone. This means that they were able to save what’s equal to a full-time employee’s salary. 

Annual NOI improvement

All of the revenue metrics mentioned up until this point have been after Parkade's fees. 

When you roll everything up together — both the increase in revenue (after fees) and the opex savings — investing in parking management software has an incredibly positive impact on annual Net Operating Income (NOI).

Whether teams are looking to calculate their property value, secure financing, make operational decisions, or pitch to investors, NOI is one of the most critical numbers to boost. 

By coming at NOI from both sides, in terms of opex savings and revenue generation, parking management technology is extremely low-hanging fruit when it comes to boosting NOI. 

At the Parkade properties we surveyed, teams saw anywhere from a $66,000 to $126,000 improvement to their net operating income from parking alone. 

While parking may not seem like it deserves to be the biggest priority for many properties, the numbers tell a different story. By investing in a proper parking solution, properties are able to significantly improve upon all of their business goals, whether it’s boosting revenue, streamlining operations, improving resident experience, or all of the above. 

About Parkade

Parkade is the #1 parking management software for multi-family buildings. With our resident-facing app and staff dashboard, parking runs itself. Your team will boost revenue, reduce time spent on parking, and improve experience for residents and guests, all without lifting a finger.

Explore our features below, built for communities just like yours.

Ready to transform parking?

Ready to optimize your parking operations and start seeing the immediate ROI?

Reach out to schedule a demo now.

What are you waiting for?