Car parks: why they are hot property for investors

A nine-level Melbourne car park has sold for $40 million – 42% more than when it sold two years ago.

A Chinese investor bought the site at 300 Flinders St amid what selling agents said was a huge level of interest from potential buyers locally, interstate and offshore.

Savills agents Clinton Baxter and Nick Peden say the price paid for the Melbourne car park translates to $69,700 per parking bay.

“Melbourne’s CBD car park market is an exceptionally tightly-held and lucrative market sector, one that is protected by planning policies aimed at minimising the construction of additional car bays within the central CBD,” Baxter says.

The Sydney Opera House car park is reported to have sold recently for $80 million.

Experts say CBD car parks are an increasingly sought-after investment. They are low-maintenance, can be open 24-hours a day, can operate automatically and have low refurbishment costs.

Peden says the Flinders St car park sold on a yield of 6.07% based on the passing income of $2.429m per year.

“And the buyer can expect solid income growth with fixed annual rental increases built into the new 10 year lease to Secure Parking,” he says.

Colliers research in 2012 found the supply of CBD car parks was slowing and existing ones were becoming more sophisticated as operators introduced technology including individual bay sensors.

Colliers Director, Office Valuations, Peter Volakos says while yields have tightened in recent years, car parks remain sought-after investments.

“Vacancy is virtually non-existent because the way they operate is they are run on management agreements or leases,” he says.

“Operators chase landlords. You essentially don’t have vacancy issues.”

Volakos says they are also low-maintenance investments: “There isn’t much in the way of finishes that become dated over time. They are very easy to manage.”