The reason for parking fees pain

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When a new shopping centre is built the local municipal council compels the landlord to provide parking to cater for the inevitable surge in traffic. Depending on the location, council sets the parking requirements at six parking bays per 100m² of shopping centre.

With the mushrooming of shopping centres all over the country, local government appears to have taken the approach that where commercial development is taking place, providing parking should fall on the developers' shoulders. This has led to a number of interesting results. At The Glen shopping centre, owned by listed property company Hyprop Investments and Ellerine Bros, in exchange for providing a taxi rank, council has granted the landlords relief on the number of parking bays required per 100m²

Says Hyprop CE Peter Prinsloo: "Partnering with the taxi operators has definitely been mutually beneficial. In exchange for not charging them for the use of the taxi rank, the centre benefits from the transporting of shoppers and some of the tenants' staff."

The co-operation saved the landlord substantial capital outlay. This is because the building of parking bays does not come cheap, especially when one considers that a single parking bay can cost anything between R80000 and R200000.

Stephan le Roux, Growthpoint's divisional director for retail, whose company's portfolio includes 50% of the V&A Waterfront, says: "The cost of building the bays varies depending on whether they include underground parking and whether the centre is located near a coastal area."

Le Roux says the cost of building underground parking at the coast spikes because of "the high water table issues the engineers need to deal with".

"The logic behind charging for parking is twofold. Firstly, it's a way for management to try to recoup some of the capital investment for building the spaces. Secondly, it's a means of access control, to prevent people who are not using the facilities while shopping from abusing them," says Erwin Rode, a property economist at Rode & Associates.

This, argue the landlords, is why parking fees during the week operate on an increasing scale, perhaps starting at R6 for anything up to an hour and escalating by up to as much as R2 for every hour thereafter.

This type of fee structure is meant to prevent parking "squatters" from using the centre's parking for their own purposes, which could result in shoppers being unable to find a bay to park in. During the weekend or after 6pm, in a bid to encourage shoppers to stay longer, the fees are typically adjusted to a flat rate.

On average, parking fees account for 5%-6% of the landlord's revenue. This is why landlords tend to outsource their operations to third parties. There are a few players in the parking services business, the biggest supplier of parking equipment being IntellePark, and the biggest parking service operator Interpark, which has roughly 70% of the market throughout the country.

Interpark MD Kate Wolfaardt says her company effectively operates the parking services on behalf of the landlord. "We provide the staffing, the cash management and handle customer services in exchange for a management fee."

Wolfaardt, who often advises landlords on what to charge customers, says: "The single biggest factor in determining the parking rate is the shopping centre's location. The closer you get to high income areas, the greater the charge. Obviously it's a grudge purchase but if you provide added value in the form of additional security and protecting the car from the elements, people are prepared to pay."

She says that in the 10 years she has been in the industry she has not seen a fall in the number of people going toa mall after the introduction of paid parking.

Source: Financial Mail