Real Clear Software Blog Post

Flexible Workdays: What About Flexible Parking Charges?

Parking ratios with hybrid work schedules

There are plenty of articles out there referencing a new 'hybrid work environment' as a result of the Covid pandemic. In fact we have written a few articles ourselves discussing how effective working from home can be, and we asked if and when employees are coming back to the office. However there are some topics related to flexible work environments that haven't been addressed yet.

Hybrid Work Schedules Affect Office Building Leases more than other product types.

To begin with, most of the time when considering a flexible work schedule (i.e. working remotely or from home) it primarily revolves around the 'office' aspect of business. Hybrid work schedules tend to relate to management personnel, sales teams, and other office-oriented uses. Other commercial real estate product types do not seem to be impacted as much by this hybrid experiment. Retailors still need to have onsite employees, manufacturing still needs people doing the work, and other real estate product types still have people on-site. It is the office users and office buildings that are most experiencing this change.

With that noted, it becomes prudent to focus on ALL of costs associated with office buildings, and not just the basic rent. Additional costs such as parking charges, operating expense pass throughs, and other items typically associated with office buildings can and will be affected by this new hybrid work environment.

What happens to building operating expenses when employees work from home?

Take for example operating expenses. If office employers are only requiring employees to come into the office part time or on specific days, theoretically that should reduce electricity usage simply because there is less computers plugged in, less copiers being run, less printers being used. This should run true for other items as well. What about cleaning schedules? Do you really need to have a daily cleaning for a partially occupied office? If that is the case, wouldn't that mean base year or expense stops would change? In addition, theoretically there is less wear and tear on the building, thus does that provide a savings as well from the capital expense side? These are topics and costs to consider for both landlords and especially larger office tenants.  Only time will tell.

Don't forget about parking when considering hybrid work schedules.

Another cost associated with office buildings is monthly parking. Often times, parking is considered an ancillary cost or an 'add on' in addition to the building rent. That said, what happens when your office employees only come to the office a fraction of the month? Why pay for full time parking when it is only being used part time? Depending on the market, parking charges can be anywhere from 10% to 20% of an additional add on to the rental rate. If employees are not fully utilizing the parking this cost is a wasted expense for tenants. In addition, if the parking structures are less utilized, there becomes less of need for higher cost reserved parking.

Landlords can consider new parking ratios and strategies.

It should be noted that building owners are not going to give up parking revenue because of a tenant's business practices. However, it could be presented to landlords that if a tenant is practicing a hybrid work modal, those tenant leases may not need to call out for 4:1 parking ratio, but instead at a lower ratio maybe at 3.5 to 3:1. The reality is most larger office buildings are not truly parked at 4:1 parking ratios, but instead are parked at a lower ratio such at 3.5:1 because there is always a 'transient buffer' included for tenants coming and going, or for vacancy rates. If tenants are working from home more then that buffer can be increased, meaning some tenants can be offered a lease with 3:1 parking. If so, that could provide the flexibility for the landlord to offer other tenants over standard parking. You can see in other product types such as retail, landlords have been very creative with how parking is applied. It will be interesting to see if municipality requirements for parking will adapt as well.

Do Not Count on Self Driving Cars or Uber to Fix the Parking Issue.

There is no doubt that autonomous vehicles are coming. That has led many people to declare that parking will become obsolete, but do not count on that in the near future. Autonomous vehicles will still require places to park. Moreover, non-autonomous vehicles are not going to disappear overnight. Maybe Uber and Lift can be a solution so that people do not have to worry about parking when they do get to the office, however that would make for an interesting expense report discussion as well. Depending on the market, taking an Uber may be cheaper than a one-day parking charge.

Real Clear Software Can Help Monitor Parking.

No matter if you are a tenant or a landlord, Real Clear Software can help manage your parking data, as well as all other real estate information. With our ability to customize the data tracked we can help determine where parking ratios, passes and more are being applied.

Real Clear Software's commercial and cloud based real estate management software offers many features to help firms track business and real estate-oriented information and performance. RCS integrates portfolio, transaction and document management, project management, data security, performance measurement, data analysis & comparison, real time data access, stakeholder collaboration, CRM, demographics, and the generation of various reports. For more information on Real Clear Software, please visit, email, or phone (949) 445-6220.

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