Sweating the asset
Published: 22 December, 2011
Asset managers are failing to make the most of their car parks, according to new research from Jones Land LaSalle
Jones Lang LaSalle has just released Shopping Centre Car Parks: Adding Value to the Retail Experience, based on a survey analysing the performance of 113 shopping centres across Great Britain, with the aim of assessing how the facilities have fared over the past year.
The report examines regional variations, tariffs and turnaround, technological improvements and overall revenue generated. Another aim of the research was to “consider how centres need to adapt and develop their car parks to make them work harder in an ever more demanding retail environment.”
The report points out that “car parks, like the retailers they serve, are inextricably linked to the current economic downturn, and suffer the same consumer spending pressures.”
Forty-eight of the surveyed shopping centre car parks are operated by the landlord, which receives the income directly, and 15 are operated by third party specialist management companies, including NCP, Euro Car Parks and APOCA, with the landlord receiving all net revenue, minus operating costs and fees. Thirty-seven centres generate no revenue to the landlord whatsoever - 14 offer free parking, and 10 were owned by a local authority or supermarket.
The report also shows that car park performance varies by region. The availability of public transport, prevalence of car ownership and density of population are highlighted as contributing factors.
The number of car parking spaces within the survey ranges from 165 to 2,774 spaces, with an average of 923. The South East (excluding London), has the largest car parks, averaging 1,227 spaces per centre. And the researchers found that Greater London has the highest tariffs, in excess of £1.20 per hour; reflective of the high average running costs of £670 per space.
The average shopping centre car park in the survey has 33 disabled car parking spaces, which amounts to approximately 3.5 per cent of the total spaces available. Current guidance on disabled parking requirements states that existing car parks should provide 4 per cent of spaces for the disabled, rising to 6 per cent for new facilities. Eighteen car parks (37 per cent) exceeded the guideline provision.
Jones Lang LaSalle used Cost to Income Ratio to measure the performance of total running costs against gross income generated by the car park, in order to measure efficiency - the lower the percentage, the higher the level of efficiency.
With a ratio of 24 per cent, the South East significantly out-performs the other regions of Greater London, South and South West, Wales, Midlands and East Anglia, and Northern England and Scotland. The report attributes this to the “higher volume of spaces, more recent tariff changes, lower average running costs and high average daily turnaround per space.”
Worryingly, the 2011 survey reports a potential decrease in demand for parking over the last year.
Some regions are performing well, however the national average turnaround is 2.1 cars per space per day, a reduction of 10 per cent on the 2010 figure of 2.2. This is supported within the BRC September Quarterly Trend Analysis; which has identified over the past three years a drop of 1 per cent in retail footfall year on year. And the reports finds that in the current downturn, landlords have resisted raising tariffs with the majority making no changes in the last three years. Three per cent reported that they have actually reduced tariffs.
The report outlines the following four questions that landlords and operators should consider when looking to improve performance: Firstly, is the business being operated in the most efficient manner? The Cost to Income Ratio is a useful guide to determine the efficiency of the car park by analysing total running costs against gross income. Focus on reviewing the five largest operating costs; business rates, staffing requirements, utilities, maintenance and cleaning. Consider also your parking payment system. If the parking management is fully outsourced, alternative systems can offer better in-house control over operating costs.
Secondly, is the correct pricing policy and marketing strategy in place? Consider promotional tariffs at times of weak demand or other parking discounts jointly with retailers. Develop additional revenue streams from advertising or evening/night time use by nearby leisure or hotel use.
Thirdly, is the parking environment the best it can be? Focus on security, good lighting and cleanliness. Does the car park have Park Mark Safer Parking Award status which gives confidence to customers and acts as a security deterrent?
And finally, is there a constant focus on initiatives and innovation to address future threats and opportunities? Keep up to date with trends and predictions. Be aware of your competition and the latest technological developments and service initiatives.
Looking to the future, Jones Lang LaSalle’s 2010 report identified the need for landlords to inject capital into their car parks in order to keep in touch with technological advances, demographic change and the flight towards ‘green’ travel over the next decade.
“As we move further in to uncertain retail times, the requirement to future-proof is not just about innovation but the need to promote customer retention and improve the all round shopping experience,” it reads.
The report urges landlords and operators to consider car usage itself. “The fluctuating price of oil and increasing cost of car ownership is certain to have an impact, particularly in the immediate future as global economic pressures increase,” it says. “The daily turnaround per car parking space has decreased by 10 per cent in just 12 months. Department of Transport statistics tell us that the number of newly-registered vehicles has begun to plateau.”
Against this challenging backdrop, the report identifies three core functions the car park needs to perform to ensure the experience is a positive one.
Firstly, make it easy to pay. There are many new systems which offer advantages in terms of speed and an improved cash-lite customer experience, including Near Field Communication (NFC) technology, pay as you go systems done by mobile phone, and Automatic Number Plate Recognition (ANPR).
Next, make it easy to park. LED guidance and bay monitoring systems improve traffic flow by alerting customers to empty spaces with lights above individual bays, reducing bottlenecks and increasing the speed at which customers can park. The Bentall Centre in Kingston-upon-Thames reported a 20 per cent increase in usage and revenues following the installation of this type of system.
And lastly, make the car park a service in itself. In future, the report predicts landlords will invest more in branding and treat the car park as a valuable part of their shopping centre experience.
Knowledgeable, service-orientated staff will guide shoppers to their destinations and flag up revenue generating extras such as valet servicing.
Some larger centres already provide advance traffic warning with regards to popular routes out of the area. The ever-increasing ‘green’ agenda will mean the provision of better recycling facilities, and more dedicated spaces for National Car Share schemes and Electronic Vehicles.
The report concludes: “With government initiatives to reduce car usage and improve public transport, plus a levelling out of new car registrations and rising costs of car ownership, car park owners cannot realistically expect to grow their business through volume increases. While professional management and stringent financial controls remain vitally important, it seems clear that a focus on customer satisfaction and retention is the key to future success.
The report concludes: “The growing demand for superior customer service in all aspects of daily life coupled with continuing technological advances provide an opportunity for forward-thinking centres to transform and thrive in even the most demanding of economic environments.”
• Richard M Davies, lead director of shopping centre management at Jones Lang LaSalle, who edited the report, can be contacted at richard.m.davies@eu.jll.com
John Michell, lead director of shopping centre management at Jones Lang LaSalle, gives his view of the report and what it means for the future of shopping centre car parks.
Car parks attached to shopping centres need to work harder in these recessionary times. They are simply not the ‘cash-cows’ they used to be. Research shows that Net Operating Income (essentially revenue less operating costs) is starting to feel the strain. Increased competition from other centres and online retailing means that simply increasing tariffs is no longer the answer. Furthermore, in an effort to encourage shoppers in to town centres, the government is encouraging councils to lower parking charges. All this, combined with a 10 per cent reduction in the daily turnaround per car parking space, is putting shopping centre car park operators under pressure to find other ways to maintain margins and drive value out of their car parks in the rapidly changing retail market we are currently experiencing.
One of the first areas to consider is the effectiveness of the car park management regime itself. The cost to income ratio is an important benchmark in this respect; the lower the percentage, the higher the efficiency. Clearly if tariff increases are not an option, then the focus needs to be on reduction in operating cost without a diminution in the quality of service itself. Cost cutting must not be at the expense of the ‘shopping centre experience’, especially as the car park is the first and last impression for most visitors to shopping centres.
So which area should be tackled first? With government targets to reduce emissions in commercial buildings by 2015, managing energy consumption cannot be ignored. Car parks consume a huge amount of energy. A simple energy audit is inexpensive and can identify basic housekeeping measures such as the introduction of PIR’s (movement activated lighting) and energy efficient strip-lighting, all of which can deliver substantial cost savings and with a relatively quick pay-back.
Security represents 61 per cent of total running costs in the car parks we surveyed, closely followed by cleaning at 23 per cent. Competitive tendering of cleaning and security contracts by professional procurement managers is a given as far as most managing agents are concerned. The opportunity to review manning levels and possibly introduce efficiencies through basic multi-tasking can achieve good results. We work very closely with our approved suppliers to provide optimum service at competitive prices. However, the industry is turning more and more towards the use of innovation and technology to reduce operating costs and improve efficiency in the management and operation of car parks.
With the advent of new technologies such as ‘wave and pay’ and Automatic Number Plate Recognition (ANPR), the traditional methods of controlling access and managing car park revenues have been revolutionised. ANPR has been in use for some time at airports and station car parks and is already starting to impact on shopping centre car parks.
Similarly ‘wave and pay’ technologies are becoming more prevalent as banks such as Barclays are keen to roll-out contactless credit and debit cards. This solution reduces the need for both parties to handle cash. Visitors no longer have to worry about having the right money. It is also good news for the operator as these systems need less manning and costly maintenance is reduced.
Perhaps the single most significant development in this area and indeed all retailing is the growth of smart phones. If your phone is enabled with Near Field Communication (NFC), it can be read by the system allowing you entry in to the car park. You are then billed separately, based on usage. In addition to the management benefits of this system, it also provides customer loyalty opportunities such as future discounts on parking and offers within the shopping centre itself. There is also an opportunity to capture data such as shopper patterns and other useful information which will, in turn, allow a more targeted marketing strategy.
Car park owners also have to operate with a view to the ‘green’ agenda. This type of technology is already making the traditional paper ticket system obsolete. Thousands of paper tickets are used and discarded every day, making the whole exercise expensive and wasteful. In addition, we are beginning to see the provision of dedicated spaces for National Car Share schemes and Electronic Vehicles in response to the government’s aim to see 1.7m electric cars on UK roads by 2020.
