New York City Parking Garage Operators Are Under Stress
The co-op at 201 E. 66th St. (left) and the entry to its parking garage.
Oct. 30, 2019 — Co-op and condo boards are asked to renegotiate contracts, cut rents.
Jon Shechter received some bad news in June 2018. “Our garage operator came to us to ask for a rent reduction,” says Shechter, resident manager of 201 E. 66th St., a self-managed, co-op on Manhattan’s Upper East Side. “We told him that was not going to happen.”
The resulting confrontation thrust Shechter into the turbulent world of parking garage operations. The business is becoming less profitable, according to companies that operate parking for co-op and condominium properties like Shechter’s, and, as a result, a growing number of operators are asking to renegotiate their contracts.
“I’ve seen it with several buildings,” says Andrew Brucker, an attorney with Armstrong Teasdale who represents numerous co-op and condo boards. A firm that operates a garage with 100 spaces might ask to cut its rent from $700,000 a year to $500,000 – a huge discount, Brucker notes.
The business is changing for a simple reason: demand for parking spaces is dropping. The number of cars that rent parking spaces by the day or the hour in “transient spaces,” a prime profit source for operators, has dropped 10 percent in the past year and a half, according to the Metropolitan Parking Association.
People who used to drive themselves now increasingly rely on such ride-share services as Uber and Lyft. The number taxis and “for-hire” vehicles registered in New York City doubled since 2010, reaching more than 100,000 in 2017, according to the New York City Mobility Report 2019, prepared by the city’s Department of Transportation. Meanwhile, the number of vehicles that enter Manhattan south of 60th St. dropped to an average of 709,000 a day in 2017 from 776,000 in 2010. It all adds up to fewer drivers looking for short-term parking spaces.
“Revenue is down for parking garages,” says Brucker. “But how much?” He always asks parking companies to show him their books if they want to renegotiate rents. “I have never been successful,” he says. “They don’t want you to see the profit they have made from you over the years.”
Garage operators also grumble that their costs are increasing. The minimum wage will rise to at least $15 an hour by the end of 2019 – up from as little as $10.50 in 2016. However, the garage at 201 E. 66th St. needed just five employees to stay open 24-hours a day. “If that’s a deal breaker for you,” says Shechter, “then you shouldn’t be in business.” He adds that demand for spaces in his co-op’s underground garage had appeared strong. On most mornings, relatively early, the manager set out an orange traffic cone to block the driveway because the garage was full.
Parking companies worry that their business might suffer yet again if New York State lawmakers go ahead with their proposal to charge drivers to enter Manhattan below 60th Street. But Shechter believes this so-called “congestion pricing” could help his garage, since it is located a few blocks outside the zone.
In December 2018, the parking company decamped from Shechter’s garage with three years left on its lease. The split was acrimonious. The parking operator urged many monthly customers to take their cars elsewhere. The co-op began operating the garage in May, after arranging a new license with the city’s Department of Consumer Affairs and converting some of the garage space to storage. It is now rebuilding its parking business, and is already back up to 50 monthly customers from 20 in May. “We are a self-managed co-op,” says Shechter. “Taking on the garage was not a big stretch.”
Rather than taking over garage operations, some co-op and condo boards are accepting lower rents. “A reduction in rent is a ‘no-fuss’ solution,” says Brucker. “They don’t want to take the chance.”