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Parking biz: silver lining.

That the Manhattan public parking industry is now having its trials and tribulations should come as no surprise to observers of the New York real estate scene. With employment down and the commercial market soft, owners and operators of garage and lots are bound to feel the effects.

The 1987 stock market crash sent tremors reverberating beyond Wall Street. Today in Manhattan, employment In the public and private sectors is considerably less than it was only six years ago (the unemployment rate is almost 50 percent greater than it was one year ago). Clearly, less employees means fewer computer vehicles and for those who still opt to drive to their offices, more are car pooling today than ever before.

A combination of declining parking rates, spiraling wages, and escalating real estate taxes does not bode well for the industry and it comes as no surprise that in many instances net income from certain locations is off by as much as 20 percent. An increasing number of operators have renegotiated leases more favorable than their original ones, or at the very least, have obtained temporary concessions from property owners. In several instances landlords have actually initiated eviction proceedings, a costly procedure, but for a hard pressed landlord, perhaps the only solution.

Yet, all is not bleak on the economic horizon. A "hands-on" operator with a good track record and access to capital can seize the limited, but very attractive, opportunities now available. For instance, one of my clients is negotiating to net lease an outstanding 75,000 square foot garage in Midtown Manhattan's East Side. The lease incorporates the following provisions: * An initial rental (including real estate taxes) of $9 per square foot * No escalations for the first five years and very modest increases thereafter * A 20 year term * Six months concession * Three months security
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Title Annotation:Review and Forecast, Section IV; economic downturn allows parking industry to renegotiate leases
Author:Freidus, Stephen
Publication:Real Estate Weekly
Date:Jun 24, 1992
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