Driving forward: the future of car parks
By Paul Gallagher, Car Park Consultant at JLL. This article first appeared in Parking News on 1/10/2018.
Investors are having their interests piqued by car parking at present. Some huge deals have taken place recently with eye-watering prices, such as the recent purchase of Q Park by US investors Kohlberg Kravis Roberts (KKR) for £2.95bn. Another landmark deal saw Japanese operator Park 24 and Development Bank of Japan acquire National Car Parks (NCP) for £312 million from Australian infrastructure fund Macquarie, after a previous purchase of Iberian operator Empark. Macquarie itself has now purchased Parking Eye, a UK company, showing the scale of interest in the market. And if there was still any doubt as to the buoyancy of the market, the EBITDA multiples on these transactions have been between 15 and 17, some serious numbers.
So, what is driving this interest from investors? Car parks are increasingly being considered as ‘main stream’ investments, with investors better understanding the metrics of operational businesses and the cashflows they produce, backed up by the underlying land values upon which the car parks sit. This is feeding the growth in demand for the investment in to car parks and car park businesses.
Car parks themselves are changing, offering chances for the industry to capitalise on emerging trends. Data is crucial in the digital economy, and the data produced by car parks will have a major impact; in fact, it will be worth its weight in gold. Every time a car enters or leaves a car park it leaves a data trail. The date and time that the car entered and exited, how much the driver paid, method of payment and so on are all recorded. By capturing the data recorded, customers’ behavioural patterns can be analysed and interpreted.
Modern cars are becoming ever more connected, and future choices on parking might be made by cars rather than drivers. Car parking machines may become a thing of the past with parking paid for through apps or by the car’s registration number becoming a ‘virtual ticket’ for all parking transactions. This will further feed into the data reservoir which, if analysed properly, will lead to cark park demand predictions. Historical data can then be used to predict future use patterns within car parks.
Mobility as a service
Car park operators may also evolve from straightforward parking providers to mobility services providers. Mobility as a Service (MaaS) is becoming an increasingly familiar theme in urban transport systems on the cutting edge. As cities move towards banning cars to lower emissions and increase walkability, it‘s likely that in fewer people will own cars, and will utilise car clubs, ride-sharing and ride-hailing as their preferred mode of transport. Car parks may also become hubs for final mile journeys, be these by bicycle, scooter or foot. This will be further driven by generational change as younger generations adopt new concepts of mobility.
The increasing prominence of electric vehicles, driven by Government policies to improve air quality, will mean that car parks also need to evolve to meet this trend. Electric vehicle infrastructure in the UK is currently lagging behind the rest of Europe, particularly Nordic countries. A recent piece of research carried out by JLL on local authority car parks showed that out of 276,000 spaces in the survey only 0.003% had any electric charging capability. Without improvements in charging infrastructure the electric vehicle revolution could well stall.
Car park operators need to be at the vanguard of this infrastructure rollout. Car parks that offer electric vehicle charging will become destinations, and those that do not risk being left behind. Studies have shown that car parks with electric vehicle charging enjoy increased dwell times and can profit from the power they supply. According to research by the electric vehicle charging network ChargePoint, when one of the largest retailers in North America installed electric vehicle charging points at one of its new locations, it saw that customers using their charging points increased their dwell time at the store by 50 minutes (an increase of 327%). The charging points dispensed 3,910 kWh of electricity, costing the retailer roughly $430 but overall throughout the timeline of the pilot project, its gross revenue increased by approximately $56,000. The retailer is now rolling out a nationwide installation of electric vehicle charging points across its locations.
As history demonstrates, change is inevitable. This doesn’t have to be feared, and for car park owners and operators who embrace it and diversify to become mobility service providers, they could be in a position to avail of great opportunities for growth and increased revenue. With the ever-increasing importance of data becoming clearer in multiple industries, the parking sector is no different. If operators can leverage their data to identify areas for improvement, bottom lines can only improve. Why resist the future? We should be meeting it with open arms.
This article first appeared in Parking News on 1/10/2018.