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In 1916, John D. Rockefeller became the world’s first billionaire, with a fortune worth nearly 2% of the U.S. economy 💰

Today, there are roughly 2,640 billionaires worldwide and about 750 in the U.S., per Forbes. Most live in California, New York, Florida, and Texas.

Today, we’ll discuss who profits from parking lots and garages in just 4 minutes to read.

— Matthew

QUOTE OF THE DAY

“The stock market is filled with individuals who know the price of everything, but the value of nothing.”

— Philip Fisher

WHAT ELSE WE’RE INTO

📺 WATCH: Why factories are coming back to the U.S.

🎧 LISTEN: The future of AI with Bob Muglia

📖 READ: The phrases to use for ‘better etiquette skills’ in business and life

WHO PROFITS FROM PARKING?

Big lots

Yes, this is a story about parking. Before you yawn, know that pavement and concrete with painted lines have made many people rich.

Businesses are born by chance, and the parking garage business is no outlier. As the automobile became popular, people wanted a place to park. Streets became too crowded, so garages and lots followed.

Today, there could be over 1 billion parking spots in America, thanks to steady growth for decades: The 1950s were a parking garage boom as the automobile took off in America post-World War II. The pandemic has since called many to question the need for many garages and lots in prime areas, but there remain about eight parking spots per car. They cover 30% of our cities and, collectively, take up about as much space in the U.S. as the state of West Virginia.

Parking lots and garages influence where we go, where we stay, and our surroundings. Often, parking lots are bigger — or much bigger — than the building or restaurant it surrounds. And many garages take up entire city blocks, even as some American downtown areas struggle out of the pandemic.

Which begs the question: What to do with all that parking?

“Eliminating parking requirements can have this huge impact on the quality of life and sustainability of a community,” an architecture professor at Cornell University said this year. “It is among the most significant changes that a local government can make.”

Parking economics 101

The parking industry might be boring to the average person, but there’s a lot that determines whether they’re profitable for owners.

Location and demand: Location, location, location. The real estate cliche is critical to a parking lot’s profitability. Garages in high-trafficked, high-demand areas are more lucrative than lots in suburban or rural areas with ample parking.

Pricing: The art and science of pricing is fascinating, and many lots and garages compete on price with scales that range from day rates to “early bird” specials to weekend and evening rates.

Managing operating costs: It might not seem like it, but garages and lots can quickly rack up expenses. Both have property maintenance costs, security, staffing, insurance, and property taxes. Garages also have lighting and other electrical upkeep. Repaving, pothole repairs, and general upkeep can add up, especially for older structures.

That’s in a nutshell. There’s also the question of whether the owners actually own the property or pay a lease or rental fee for the land on which the lot is situated. Owners must make regular payments if the parking lot is financed through a loan or mortgage.

Technology improvements for equipment such as ticketing machines, payment systems, and software for managing reservations and customer data can also be substantial costs. Even permit and licensing fees to operate a facility legally factor into the equation.

There’s also growing awareness around legal and administrative costs and environmental compliance, such as stormwater management and pollution control.

Big players

One New York City man owns more than 100 parking garages in New York City, continuing the empire his father started in the 1960s. That’s typical in the parking business, which often doubles as the family business. The biggest challenge? Many say it’s hiring and maintaining staff, especially amid a still-tight labor market, and finding new locations to expand.

“With all new developments, we bid on the garages with the developer—these are garages that are already in the basements of the buildings,” the NYC parking garage owner, Bill Lerner, told The Atlantic.

“When leases are expiring with other operators, we’re asked to bid on them. So it’s not us picking a location; it’s typically a building being built with a garage in the basement.”

To be sure, there are plenty of larger companies in the space, including SP+, which primarily works in healthcare facilities, airports, universities, and municipalities. LAZ Parking works with hotels and other commercial properties.

ABM does business with bigger entities, too. When you really think about it, parking is ingrained in our culture, and it’s expected at everything from malls and football stadiums to hospitals, airports, and office complexes.

The future of parking

The industry isn’t pushing ahead without headwinds. The pandemic reduced demand for many garages, especially in urban areas and around offices. It’s unclear that demand will ever fully recover, leaving many urban planners to question the usefulness of large garages, half-empty, in downtown areas.

Many garages aren’t the prettiest-looking objects in a city — you likely won’t see them featured on brochures or in Instagram stories — and city planners have wondered about better uses for their valuable space. And as Americans drive less frequently, many analysts say we have way too much parking, a glaring inefficiency in the marketplace.

Some cities are (slowly) converting old garages into offices or housing units, though it’s a time-consuming, expensive process that requires a lot of signatures and approval. Still, urban planners are optimistic.

“The Dutch have reclaimed land from the sea, and I think we can reclaim land from parking,” one urban planner at UCLA told the Wall Street Journal this year.

Other cities are granting rezoning requests for developers to build apartments, even downtown, with no resident parking whatsoever, instead making extra room for fitness centers, bike storage areas, pools, and outdoor seating.

Several years ago, Buffalo, N.Y. set the trend by becoming one of the first big cities to eliminate parking requirements. Now, others are following suit as developers, city planners, and government leaders think harder about maximizing downtown real estate.

Said Buffalo’s director of strategic planning: “The priority was people are looking for a place to live, not to park.”

Not everyone agrees. Some city planners worry that a lack of parking will keep people from visiting the area’s stores and restaurants. “We want to make it easier for people to come,” one Philadelphia official said. “Having less parking space isn’t making it easier.”

Dive deeper

For more, here’s Vox’s fun video on the high costs of free parking.