As Retail Becomes More Urbanized, Retailers Cling To Their Parking Ratios Of The Past

Coffee roasters Batdorf & Bronson was close to opening one of its popular Dancing Goats Coffee Bar locations at Atlantic Station, a landmark mixed-use project in Atlanta, but the lack of parking kept the café from signing on the dotted line.

Atlantic Station does not lack parking, however. An ocean of 7,000 spaces sits underneath the mini-city developed by Hines in Midtown Atlanta.

“They wanted me to reserve a dozen parking space[s] for them right in front of their stores, and I can't do that for them,” Hines Director of Leasing Nick Garzia said. "They can't get past that."

As cities like Atlanta have seen a resurgence in the urban core, with waves of people returning to live in cities, that has spurred developments with urban-format retail for merchants wanting to be closer to their customers.

It has also has created tension as developers try to reduce the number of spaces on projects in the city to save money and because, in 2018, they just do not need as many anymore.

Parking ratios are among the dichotomies of Atlanta's retail market in 2018, alongside the market's strong leasing as major retailers continue to shutter stores. Garzia and a host of Atlanta retail real estate experts will examine the trends at Bisnow's Atlanta Retail: Transformation of an Industry event Dec. 12.

“From the tenants' perspective, the easy answer is there can never be enough parking,” The Shumacher Group founder Harold Shumacher said.

But parking ratios at new developments, over the past decade, have declined on average, Fuqua Development partner Jeff Fuqua said. As mixed-use projects have become more commonplace, Fuqua said he has seen the average number of parking spaces in each of his developments drop by 20%. Fuqua projects now provide four spaces for retail and 7.5 spaces for restaurants per 1K SF. A decade ago, those ratios were five and 15, respectively.

But, even with constraints, developers are still overbuilding parking in many retail projects, said Chris McCahill, the deputy director of the State Smart Transportation Initiative with the University of Wisconsin in Madison.

Municipal parking ratio requirements “aren't really based in much science," McCahill said. "A lot of times they are too high.”

While specific required parking ratios can vary widely by jurisdiction or even neighborhoods within a city, today a typical retail center will build four spaces per 1K SF of retail space. That is a ratio locked in often by investors of real estate, concerned that having too little parking will harm the center's ability to lure tenants.

But even that is usually too much, McCahill said.

“Usually, we're overbuilding parking in a lot of places by 50% or more,” he said.

In urban settings, providing parking usually means building parking decks, but building a concrete edifice for vehicles is expensive. Fuqua estimates a wraparound deck at a mixed-use project could add $16M to the project cost. It may actually be cheaper to buy extra land for surface parking; if any virgin parcels are available, that is.

“It's a risky move to build under-parked and finance and sell it,” Fuqua said. "[Investors] don't think it works."

Eden Rock Real Estate Partners scrapped plans for deck parking in favor of more surface spaces in its Westside Village at Moores Mill mixed-use development in the Upper Westside neighborhood in Midtown Atlanta.

“I think structured parking and retail, they don't mix really well, which is why we always try to provide surface parking as a primary option," Eden Rock Real Estate Partners partner Brandon Ashkouti said. Deck parking is often a viable secondary option to a development, he said.

Ashkouti's rationale: Westside is one of the hottest submarkets in the city right now, and one where new housing is prominent. That is bringing in lots of young families to the area. Parking decks are psychologically a turnoff for moms pushing strollers.

“Those moms and kids really don't want to be in a parking deck,” he said. "So instead of building a parking deck, we bought more land because we knew it would be a better customer experience."

Eden Rock earned a variance from the city of Atlanta to reduce the number of spaces from 600 to 350, thus avoiding the need to build a deck. Ultimately, Eden Rock will provide nearly 400 spaces at Westside Village, Ashkouti said.

In mixed-use projects, the concept of shared parking has become a popular answer to keeping the number of spaces in check. Not every tenant in a mixed-use project will use parking at the same time. Retailers lure customers at different times than restaurants and bars, which in turn don't have the same audience as office tenants or people living in apartments.

The idea is to curate a tenant mix that can harmoniously share a constrained number of parking spaces, Walker Consultants Senior Director of Parking Consulting Mary Smith said.

“Shared parking is really kind of the new calculus,” Garzia said. “You don't need a 100% solution for the restaurants or 100% solution for the office. As your office population is leaving the project, your dining population is coming into the project”

That ideal is not often as harmonious in practice. Smith said developers are sometimes pulled in different directions by various pressure points, especially from tenants' desire for dedicated — not shared — parking.

“All the leverage is when the tenant signs the lease. Far too many developers acquiesce” to reserving a portion of parking spots for specific tenants, Smith said, which leads to inefficiency. After all, a host of parking spaces set aside for a corporate tenant will likely go unused after 5 p.m., when restaurants' space needs start to ramp up.

Some tenants are open to the idea of having less parking, especially national retailers, Fuqua said. But in mixed-use projects, it is often the multifamily that stand firm at needing their spaces, typically 1.5 for every apartment unit. Fuqua concedes even that can, at times, not be enough, especially when a resident has a party or guests over.

“We have residential people parking all over the center because they don't have enough [spaces],” he said.

There is some hope that ratios will further decline in the future. Some pin their hopes to the growth of Uber and Lyft and eventually, maybe, autonomous vehicles. In San Diego, nightclub parking saw a 50% drop thanks to Uber and Lyft, The San Diego Union-Tribune reported earlier this year.

But that impact is really limited to those type of venues and retailers, Smith said, adding that “people are just not using it for commuting yet."

She cited a recent federal study that showed that the percentage of people who commute alone in a car to work has remained consistent between 1989 and 2016 at 76.3%, and carpooling has actually decreased. The reason the number stayed consistent was because of telecommuting and working from home, she said, not a change in transportation behavior.

Garzia said cities like Atlanta, Houston and Charlotte — where mass transit is not as institutionalized as in cities like Chicago and New York — is where parking will remain a paramount consideration in new developments.

“That's the thing about any city outside of New York or Boston or Chicago. [Big-box retailers] are used to having parking right in front of their door,” Garzia said. “I think the lack of parking [decks] is one of the detriments to the market creating a Fifth Avenue. People in Atlanta are still addicted to their cars.”

Hear more from Garzia, Shumacher and other retail development heavyweights at Bisnow's Atlanta Retail: Transformation of an Industry 7:30 a.m., Wednesday, Dec. 12, at the InterContinental Hotel Buckhead.

CORRECTION, DEC. 10, 9:05 A.M. ET: A previous version of this story mischaracterized Garzia's comments regarding parking in Atlanta. The story has been updated.