Car parks look to retail for profits

The Bucharest municipality announced some time ago an ambitious project for several underground car parks which were meant to solve the capital city's parking problem. Meanwhile, private investors are trying to fill in the gap and make some money in exchange. They say the answer to Bucharest's parking problem and to the lack of space for surface parking is the multi-storey car park. At the moment, however, one such facility alone can't sustain the business, so investors have opted for a mix between parking areas and retail space.
Bucharest will have the first car park that is part of an internationally recognizable brand, Europark, at end of 2008 when Equest Balkan Properties, the UK investment find, completes construction works, George Teleman, partner with Equest Investments in Romania, told Business Review. Not only will the fund develop this first car park, but it is planning similar projects for Bucharest and the Bulgarian capital too. “We have other new, similar projects in the pipeline and we hope to bring them to life in the following months when we will also announce the investments on the stock exchange,” Teleman told Business Review.
The investment fund took over the majority share package in the company which started this project, Trigon Properties. Such a move from an investment fund which has in its portfolio money-earning projects like Bucharest West Logistics Park, Moldova Mall and Vitantis Shopping Park, to name but a few, suggests how interesting this market niche is to investors.
“We believe investors are open to these types of developments and Bucharest currently has many companies looking for viable investments,” says Mirela Raicu, senior corporate consultant at Esop.
The Europark car park will need some EUR 19 million in investment, says Teleman. The site, which is under development in partnership with the Bucharest municipality, will provide 816 parking spaces. Of its total 14 levels – including three underground floors – only eight will be used for parking, while the first level underground, ground floor, the first two storeys and the tenth floor will host public utilities – which can be offices or retail.
The parking lot will be built on a 3,000-sqm plot on Sf Vineri Street, close to Unirii Square. In exchange for providing the plot, the Bucharest municipality will receive a percentage of the car park's revenues and 50 parking places.
The Unirii area already has a similar car park. Parking Unirea, a EUR 15 million investment, was opened in 2005 and was initially intended only for parking. The developer, Nova Trade, which also owns Unirea Shopping Center, the commercial center near which the parking lot was built, added retail to the mix when it rented the underground and ground floor to retailer Media Galaxy. The site has seven floors above ground. It was built in partnership with the district city hall, which owns 10 percent of Parking Unirea shares.
Europark is currently under the detailed design phase, with the master concept design having already been prepared by UK architecture firm Chapman Taylor. After the lot is finished, Equest plans to subcontract it to a specialized operator, says Teleman.

Car parks, cheaper than office buildings but currently less profitable
It is cheaper to build a car park on a given plot than to build an office building, by 15 to 25 percent according to Teleman. The difference in costs is in the furnishings which are not needed for a car park, says Raicu of Esop. However, a car park needs additional investments in structural elements and in the floor thickness.
The revenues that can be earned from a car park as opposed to an office building are smaller at the moment because of the current parking prices and the low take-up rate for public parking. “The revenues are around six times lower for a car park compared to an office building, according to a recent study,” Teleman told BR. Therefore, a mix between car park and retail space is a preferable option, as well as a long-term investment outlook.
“In two years, when the car park (Europark) is finished, the rate of using car parks will be higher in Romania,” predicted the Equest representative.
The biggest problem at the moment for developers interested in building car parks is the lack of good plots. “Private initiatives in this area will be successful given they are backed up by the municipality, which can provide empty plots or demolish old and unnecessary buildings,” said Raicu of Esop.
The Europark chain operates in Norway, Sweden, Denmark, Finland and in three Baltic countries.

Corina Saceanu