The Parking Lot Business

In the future, the housing development will be a dichotomous game.

In less time than a month Grupo 4S participated as a host in the most important event of Real Estate in Argentina. In the process of meeting the people who contributed in the event, we asked about the field that every participant was focusing on. Surprise came when we met several housing developers skilled on parking lots. Their projects are buildings and complete constructions where there is no thing other than “garages” (as they are called southerly).

Argentina is going through a macroeconomic tough time. Result from this complication, developers and housing enterprises have had to be groundbreaking in their offer and example of business. One of this interesting offers have been the parking lot projects, which have been set into two kinds (according to the marketing model):

1 Assigned: The projects market every space of parking as a private unit. There is exclusive usage control of the parking spot and it’s considered as a legal unit that can be sold subsequently

2 Pool: The project is marketed as a trust where a percentage of the project’s value is acquired. The project is explotes as a sole business and there are paybacks to a based % that each investor possesses. As usual, the minimum % that can be acquired is interpreted to 1 parking spot. For example, in a project of 100 parking spots with a cost of $100 pesos, the minimum to get is 1% of the project with a charge of $1 peso.

Aside these two schemes it emerges a mixed scheme that we repeatedly observe in recent projects. In this model, the underground parking spots (which are pricier) are sold as allocated and the surface spots get into the pool category that are set as an independent trust fund for its use. Entry checkpoints are added independently to ensure the protection of the exclusive spots.

This international practice vision has special importance nowadays for Mexico because of the moment that our housing projects are going through. The office buildings today are already working on more square meters of parking lots than assets, specially in cities where there is a lack of public transportation. Moreover, these vertical residencies projects have diminished the interior square meters offered to each segment in their effort of maintaining parking lots included to the cost. Finally, the shopping centres suffer to the demand of parking lot, the same effect that has left many projects outdated.

Our proposal is easy: to separate de parking lot business from the nuclear housing project. Create specialists in parking lots development and structure a business model in which makes sense a strategic association to each project. Splitting the parking from the project has multiple advantages:

1 Allows to have an independent structure that may grow according to the mid or long term that the demand requires.
2 Releases the architectural design of the column’ modulation for vehicles, which gives them freedom of design
3 Separates the cost and makes more affordable the nuclear product to the user.
4 It is possible to fit in the less value zones of the venue to enhance the position of the nuclear product value.
5 It allows better inclusion of the nuclear project to the community and to a pedestrian future and alternative transportation.
6 Considering it meets a different demand and constant growth (vehicular parks) reduces the financial risks of the project.

To make these feasible, legally in Mexico, posibilites we plead that the body of parking lot and the nuclear product must coexist in the same venue (although are managed as independent business). Legally, it would have fulfilled the base expectations. Commercially, they would be two completely independent business.

Nowadays within Grupo 4S’ portfolio there is progress already in that sense. Adamant has achieved building aggressive architecture thanks to the split from the body of parking lot. The “Semillero” (Seedbed) has accomplished the reduction of the value of vertical properties and even has achieve to sell apartments with no parking lot spots with success. But we haven’t gotten yet to contemplate dichotomous projects truly independent.

Improving the parking lot business do not mean promoting the vehicle usage. Au contraire, it means to contribute the enhancement of the business and induce the respective costs that entice those areas. To effectively fund those areas we contribute to create a vision of a sustainable future. In the upcoming times, there will be specialists on the parking lot development as in other areas. The dichotomous concept of projects will become a solid possibility of market and the industry will push the legal themes to improve the parking business. A future where developers are prepared in the changing conditions of all markets they take care of.

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