Recently I was interviewed by the Globe and Mail for a story on the phenomenom of disappearing parking spots in downtown Toronto condos. It is a well established fact that developers are building fewer and fewer parking spots downtown, even as they are building more and more units than ever before. The most recent examples of this include INDX Condos and Massey Tower which are both buildings with around a 7:1 ratio of units to parking spots. Back in the early 2000s you would rarely see a building get constructed that didn’t have a 1:1 ratio of units to parking spots.
With parking spots always being a hot topic in the downtown real estate market, here are five things that every condo buyer, seller or investor needs to know about parking spots.
1. You pay an extra maintenance fee on a parking spot
This comes as a shock to some people, especially pre-construction condo buyers who were unaware that when they payed an extra $20-$50K for a parking spot with their unit they were not finished paying for it! Developers have now started putting the parking maintenance fees right on their price sheets and marketing materials, but a few years ago, it often only showed up in the legal docs that most buyers never read! Typically you are looking at around $50-$60/month as a maintenance fee on a parking spot downtown but recently I’ve seen as high as $150/month – pay careful attention to those fees when buying new or resale!
2. Parking is an endangered species downtown
Parking spots are becoming harder and harder to find with 1 bedroom units. Even many 2 bedroom units are now selling without parking spots which would have been unthinkable just 3 or 4 years ago. The whole process is driven by buyer demand but also economics as developers are being squeezed into smaller and smaller development sites and the cost of building the parking garages has skyrocketed.
3. Parking spot values can vary significantly from building to building.
Just like how values of units can vary from $450 per square foot in one building to $750 per square foot in the building next door, so it goes with parking spots. Don’t assume because you are buying a parking spot in a downtown condo it is worth the current average of around $30-40K. In many older buildings parking spot values have plateaued or even decreased over time because the old buildings usually had as many or even more parking spots than there were units. Recently I had a client pick up a parking spot in a downtown condo only 7 minutes walk to the subway for a mere $9,000! Then you have the example of Minto Midtown at Yonge and Eglinton where parking spots can go for up to $63,000 – simply because the developer did not build enough spots in the building to meet the real demand.
4. It doesn’t always make economic sense to buy a parking spot
As I mentioned, some parking spots in new condos are charging upwards of $150/month in maintenance fees, on top of the purchase price which can be in the $60-$70K range. The monthly cost of owning such a spot is around $300 assuming you do a 20% down payment. The cost of renting this spot in the future will likely not exceed $200/month (and probably will be a little less). In cases like this it just doesn’t make economic sense to purchase a parking spot. Do the math carefully before buying a spot in any new or resale condo.
5. The big question remains: should you buy a parking spot with your next condo?
In the past couple months alone I have had two separate buyer clients purchase resale condos for themselves to live in without parking spots, even though they both had cars and were planning on keeping them. Both are renting parking spots in their building. They simply could not find a suitable property in their price range that came with a parking spot. This reinforces my theory that the pendulum has swung too far, too fast and developers are not building enough parking spots today to meet the demand of tomorrow. So for any unit with a projected value of over $400K I do recommend buying a parking spot whenever possible assuming the cost to purchase is at or below future market value.
Finally, check out this incredible parking spot solution I found from a company in the UK called Car Dok.