Paid parking garages could be the next big thing for Las Vegas’ developing downtown.
They’re typically investments that fly under the radar, but they can be quite lucrative.
“You could see it downtown,” said Brian Riffel, an analyst with Colliers International. “It’s almost like a mobile home-type investment ... People just park.”
Why would Las Vegas investors be interested in parking garages?
For one, development downtown being spearheaded by Zappos head Tony Hsieh and the Downtown Project has the world watching for opportunities to get in on the action. The more the area gets built up, the more opportunity there will be for parking entrepreneurs.
“The focus on rebuilding downtown makes it a little more desirable,” said Justin Montgomery, director of business development for Douglas Parking, based in Oakland. “Downtown has a lot of turnover.”
Turnover refers to the number of times a parking space opens and closes. Success in the parking business depends on high turnover: somebody comes in, pays, stays for a couple hours and leaves. Then someone else takes the spot and pays for it.
The more people do that, the more cash flows.
Most downtown casinos offer free parking with validation. But visitors who simply are shopping, eating or walking around typically must pay to park. Also, if a patron fails to validate a ticket, he could be on the hook for a significant chunk of cash.
At Binions, non-validated parking costs $1.50 an hour. At the Golden Nugget, it’s $2 an hour. At the Four Queens, it’s $4 an hour.
The El Cortez often charges “special event” prices for parking on the weekends, which can cost as much as $10.
That’s not sky high compared with other cities, but it adds up.
“If you raise the price a dollar or two, you move the needle a long way,” said Mark Francher, owner of Chicago-based Parking Advisors Inc. “Parking investments are very attractive to real estate investors.”
Simply put, parking garage owners can make a lot of money.
As an investor, Francher isn’t much interested in buying and operating parking garages unless they can make him more than $1 million before operating expenses. But he said many investors should be interested in Las Vegas as a potential money maker.
“Even though the rates are low compared to other cities, the number of spaces is high. There could be significant value there,” he said.
When it comes to making money in parking, developers analyze how much income a garage can produce. Because nothing is typical in the parking business, it’s hard to pinpoint an average number of parking spaces needed for a profitable garage. But most garages range in size from 250 spaces to 2,000 spaces. Depending on the price of a space, a garage could generate anywhere from $100,000 to several million dollars a year.
Many of the private parking garages downtown accommodate people now working in surrounding office buildings. It’s not uncommon for business parks, such as the Howard Hughes Center, to charge employees a fee to park.
Douglas Parking operates several downtown parking garages. The company charges $55 a month for a space on South Third Street and $115 a month near the Clark County Courthouse.
The rates are much lower than fees in, say, San Francisco, where a spot can cost upwards of $600 a month, but more expensive than other cities. In Phoenix, parking was mostly free until recently. Now it costs an average of $40 to $60 a month for a space.
So what has to happen to spark a parking garage boom downtown?
Analysts say more development. The more options, the better for a parking entrepreneur.
“What makes investments interesting is the diversity of the revenue source,” Francher said. “If you have a garage that’s near a hotel, casino or office building, there’s a multiplicity of demand. If a major office tenant moves out, you’re not dependent on that one tenant.”
But there are parking garage critics, too. Some city and county officials worry that unsightly garages and parking lots could flood the city. They are considering a possible campaign to limit the number of enterprises that can move in.
Others complain that downtown needs more public parking.
The city could look into operating a parking garage in the hopes of reaping revenue. But that would take a large capital investment and would require significant overhead costs.
“The city has to evolve with regulations,” Riffel said. “It’s a transition period right now.”
On the Strip, most parking is free. That’s because resort owners can make up the money in casinos, restaurants and showrooms.
There’s also the question of competition. If Caesars Palace, for example, started charging for parking, patrons would catch on and go to the Bellagio or Wynn instead.
Companies downtown charge for parking because they can. It’s a valid money stream, and one that people are willing to pay.
“They recognize, like any business, they’ve cornered the market,” Riffel said. “There’s only one downtown.”