Catella Real Estate, the Munich-based real estate investment manager, launched its debut pan-European car parking investment vehicle at the end of last year, with an equity goal of €200 million.
The firm said its vehicle would be invested in markets in countries such as Germany and the Netherlands, but in a departure from other parking funds in the market, it will also target second-tier markets such as Poland, Portugal and the Czech Republic.
There are currently an estimated 48,000 parking garages across Europe, according to Catella’s head of research, Thomas Beyerle, and, by his reckoning, the market will grow.
But there is currently a dearth of institutional investment in the sector at present. Indeed, according to PERE’s research, Dutch real assets firm Bouwfonds, which has marketed five parking funds to date, and the Canada Pension Plan Investment Board, which owns a 39 percent stake in Brussels based private European car-park management company Interparking, are among a handful of institutions to have engaged the sector.
However, Catella’s vehicle is said to be part of a burgeoning effort to increase investments by the world’s biggest capital providers, and the early indications are this effort will pay off. “We are definitely seeing a greater interest in alternatives such as car parks,” said Shaun Roy, partner at London-based property agent Knight Frank.
“The rationale is that they are business-critical assets with a long term lease and fixed rental increases. They are also not often openly traded and there is very limited stock,” Beyerle added.
And yet, the asset class has its critics, who cite potential technological shifts, such as the expected widespread of driverless cars and car-sharing services such as Uber as a threat to the sector.
However, Beyerle believes that the ‘driverless revolution’ will in fact act as a boon to the sector, increasing demand for paid-for parking space. The number of passenger cars, including self-steering vehicles, will increase in the next 20 years, especially in car-dependent nations like Germany where driverless car and car-sharing usage are increasing. “Demographically, I see the pattern of not owning a car, but renting as a significant growth trend,” said Beyerle. “Driverless cars will lead to central car parks, where cars can be collected, delivered and charged.
“Parking space increasingly comes at a premium, especially in city centers, airports and hospitals, while parking charges are rising significantly faster than inflation. In addition, long leases mean that parking garages enjoy low levels of volatility and stable income.”
Other factors are driving investor interest in parking facilities, including a wall of capital searching for ever-higher returns.
“Car parks will become attractive to investors because of European standards of construction and operation,” Beyerle said, adding that “there is a continuously growing demand due to a shortage of car parking space supply in many cities.”
He also pointed to higher yields evidenced in car park trades versus real estate’s usual food groups. Currently, the average yield from a new car park in a prime European central business district is approximately 350 basis points over that for a prime office property in the same district, according to Beyerle.
While that is attractive to investors, scalability could be another issue, however. Building restrictions within cities or towns hampering new construction or refurbishment of parking facilities is also a potential roadblock to volume growth, as is operating partner selection, particularly with dealflow relatively low compared with other sectors.
In any event, Catella has evidently decided that the potential pros outweigh the possible cons with the launch of its funds. In so doing, it has joined a limited number of institutional capital investors which believe in parking cash where people park their cars.