The price of parking

There’s an interesting article in today’s NZ Herald, which notes that the cost of reserved monthly parking in Auckland is relatively high compared to other overseas cities.

Monthly parking rates in Auckland are more expensive than in most big cities around the world, says a global survey.

The Colliers International Global Parking Rate Survey looked at 147 central business districts around the world last year to rank cities based on parking rates.

The survey found that for monthly parks where motorists were guaranteed a space, it was cheaper to bring cars into central Frankfurt, Los Angeles and Singapore, among many other major cities.

Auckland’s rates ranked in the most expensive third, at number 41, putting it ahead of most capital cities, such as Washington DC, Ottawa, Berlin and Beijing.

I must say I was quite surprised to hear that parking in Auckland’s CBD is more expensive than cities like Frankfurt, Washington DC and Berlin most particularly. One would imagine that the prices reflect corresponding levels of demand and supply. Perhaps Auckland’s relatively poor public transport system (or at least the perception that it’s poor), compared to many of these overseas cities, contributes to a higher demand for parking spaces than would be expected.

I’m going to jump around a bit in terms of the order of the article, because there’s a couple of paragraphs later on which note that casual parking rates in Auckland are relatively cheap compared to overseas cities:

The Colliers survey found that Auckland had high monthly rates but its daily rates, ranking at 123, were among the cheapest in the world.

Auckland’s casual daily rate was less than a quarter of Athens, for example, but its monthly rate 10 per cent more expensive than the Greek capital.

This suggests that perhaps our mix of parking supply doesn’t really reflect what the market is demanding: too many casual parking spaces and not enough monthly spaces – hence driving down the casual rates and driving up the monthly rates. I wonder whether there are any market distortions, such as council carparks offering casual parking at below market price (due to political fears of raising their prices?) that are also contributing to this trend. Many overseas cities also often have minimum parking requirements operating within their city centres (thankfully Auckland doesn’t) – which have massive economic effects but probably do bring down the price of parking in general as they require an enormous amount of the city to be dedicated to parking space.

Of course this is all very interesting, but why are the mechanisms of Auckland’s parking market of interest to me? I guess it is the issue of policy interventions – specifically something that appears to be suggested in the middle parts of the article:

Business NZ chief executive Phil O’Reilly said high parking costs could be a factor for businesses to relocate away from central business districts.

“When companies need a lot of carparks, they will move outside the city, close to motorway on-ramps,” Mr O’Reilly said…

…”It’s a matter for local government to make sure there isn’t such a shortage of long-term car parking that it discourages businesses from coming into the CBD at all,” Mr O’Reilly said.

“But that’s often a hard conversation because [council planners] will say to take public transport, but it’s not always that simple for businesses – sometimes you need cars for other reasons during the day.”

The problem with trying to bring down the cost of parking is how. You can make it far more difficult for people to find a place (by not increasing supply, but lowering the price) or you can go and pave most of your city centre in surface level parking (like Manukau City Centre) or you can end up wasting valuable development potential within the city centre on car storage devices: not exactly a particularly economically productive activity one would think.

While businesses will obviously sometimes need to use their cars during the day (another reason to improve inter-peak public transport) it seems unlikely that would require most staff to bring their cars in – rather it might make more sense to set aside spaces for a few company cars that can be used throughout the day.

However, it seems that some want more regulatory intervention:

Traffic Institute vice-president John Gottler said there were so few long-term parking spaces in Auckland’s CBD that it had become necessary to set a price ceiling for parks.

The increasing numbers of students living in the central area were particularly affected, Mr Gottler said.

I’m not quite sure what Mr Gottler’s wanting here. Is he wanting the council to subsidise the price of long-term parking to encourage more traffic onto the roads? Is he wanting council to intervene in the ability of parking companies to make a profit? The example of students in the city centre is particularly interesting, as from my experience many simply park their cars on the side of the road after 6pm when it becomes free – thereby using up all the spaces that visitors might hope to find for their shopping, eating out and so forth.

However, both Mr O’Reilly and Mr Gottler seem to have positive things to say about where things are going. First, Mr O’Reilly:

But it was increasingly rare for businesses to provide carparks for their employees, making the issue marginal, he said.

That’s interesting to note, I wonder whether that has anything to do with the positive thing Mr Gottler has to say:

But there had been many improvements to Auckland’s public transport that was making carparking a less significant issue, he said.

This is one of the really massive benefits that comes from having a much better public transport system. Once companies start to perceive that the system is of sufficient quality that they can attract staff and customers to a central location without having to provide them with a very expensive parking space, the economics of being located in the city centre changes enormously.

I have talked about the importance of perception a few times before when it comes to improving public transport quality, and this is a classic example of its importance. Over time, if we continue to invest in improving public transport, we will see a shift in the perception of the quality of public transport options available. As that shift in perception really starts to kick in, it seems likely that the trends identified by Mr O’Reilly and Mr Gottler will continue: that fewer companies will see it as a necessity to offer their staff parking (and therefore will save a significant amount of money) while the whole issue of parking costs will similarly become less important.

This cuts to the heart of why projects like the CBD Rail Tunnel are so necessary for enabling and encouraging a more productive and attractive city centre. Central Auckland of course simply can’t compete against the suburban office parks when it comes to cheap parking, but what the area does offer are all the agglomeration benefits of concentrating employment and economic activity. As well as the actual improvements to accessibility that the rail tunnel will bring, the perceived benefits may be just as important in helping to boost the fortunes of Auckland’s city centre.

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