Parking is a Predicament: Costs, Competition and SUVs Pose Challenges
(Reprinted from Healthcare Real Estate Insights, August 2003)
By Jessica Griffith
Surgeons, accountants, nurses, janitors and patients arrive at the hospital for different reasons. But, they share one basic need: a parking space. They also tend to demand parking that is safe, convenient and, preferably, free.
Providing satisfactory parking has been a challenge for most medical facilities since Americans first slid behind their steering wheels.
Today, however, parking is an even more vexing issue for many healthcare providers and developers due to a variety of issues, including:
“All too often, owners and architects forget about parking because it is not the most glamorous piece,” says Stephen J. Rebora, a vice president in the Chicago office of Desman Associates, a New York-based firm that specializes in the planning, design and restoration of healthcare parking. “But, parking is integral to any campus.”
“Virtually every project we have right now is being driven by parking,” adds Robert A. Rosenthal, president and managing partner of Pacific Medical Buildings, a San Diego firm that develops and operates medical office buildings (MOBs), parking structures and outpatient facilities.
“The size of the building is many times constrained or determined by parking.”
Parking issues are complex
Several trends are bringing parking issues to the forefront.
Many facilities were built in an era when most care was provided on an inpatient basis. Most patients were transported by ambulances or by families or friends. Thus, little parking was required.
Today, outpatient procedures dominate. Patients or their ride givers usually drive to the facilities and remain on campus for the duration of their treatment. That boosts the need for parking spots, especially during business hours.
In addition, Mr. Rosenthal says more physicians’ offices are being developed on campuses, which can be a double-whammy with regard to parking. New MOBs are often built on the sites of existing surface lots, which reduces supply, while the new services they house simultaneously increase demand.
Today’s vehicles also tend to require more space. Parking temporarily gained efficiency because smaller cars translated into narrower spaces. But, the recent popularity of SUVs and minivans has expanded parking space size requirements again.
Increasingly, providers are also using parking as a way to differentiate themselves. Plenty of close, convenient, safe parking appeals to patients and employees alike, which can be a competitive edge in a world of choosy consumers and scarce labor.
But, with costs ranging from $1,500 per space to $2,000 per space for surface lots and $8,000 per space to $12,000 per space for parking structures, parking can add millions of dollars to the cost of a healthcare real estate project.
How to meet parking challenges
Sometimes, medical facilities’ parking issues can be resolved without construction.
“A lot of times, we get called in because parking is a problem, or there is a perception that parking is a problem. More often than not, there is inadequate parking management,” says Dennis Burns, director of studies and operations consulting for Carl Walker Inc., in Tempe, Ariz. The Kalamazoo, Mich.-based firm provides parking planning and engineering.
The incremental expansion of healthcare facilities over many years can contribute to inefficient parking, Mr. Rebora adds.
A healthcare campus with an apparent parking shortage might just require some reorganization. For example, it might be possible to increase the number of spaces by adding perimeter parking or changing perpendicular spots to angled spots.
“Typically, we can add 5 percent to 7 percent more spaces by reconfiguring the lots,” Mr. Burns says.
He then reviews the parking management strategy. Hospitals present an efficiency challenge because they typically employ three shifts of workers and one shift must arrive before the previous shift can leave.
The 24-7 schedule makes it difficult to determine how much parking is required. Mr. Burns says his firm studies each facility to determine the peak parking demand ratio for each user group, but he uses no standard ratio.
Even so, hospitals can manage employee parking so the lots have a utilization rate of 95 percent, he says. Visitor lots are closer to 85 percent due to the wide variation in visitor patterns.
A remote possibility
If a reconfiguration isn’t enough to meet parking needs, new construction can be necessary.
“You have to acquire more land for surface parking and in most of our markets, which are in urban areas, that is not possible,” Mr. Rosenthal says. “That means you have to build structured parking.”
Hospitals might seek to avoid the cost of building on-campus lots or parking structures by transporting workers or patients from remote lots. In some cases, hospitals will charge for visitor parking to encourage workers to park in a free, but remote, lot.
But, hospitals must be careful when they segregate parking, Mr. Rebora says. Staff members in a competitive market prefer to work in places with on-site parking.
“Because they are in competition with each other, systems that have solved parking tend to have the best ability to attract talented staff,” Mr. Rebora says.
In addition to any perceived inconvenience, Mr. Burns says, “By the time you pay for a comprehensive shuttle program, that might pay for the debt service on a parking structure.”
Rather than just establishing remote parking, some hospitals and health systems solve the parking dilemma by moving whole departments off campus.
“You look at who needs to be on the main campus and who could be anywhere,” Mr. Burns says.
Fees are a touchy subject
If remote lots or relocated departments are impractical, new construction might be the only viable alternative. But, how do you pay for it?
Charging fees for parking seems like an obvious solution. But, that tends to be a touchy subject. Most consumers and employees are accustomed to free parking, and even well-compensated physicians tend to object to paying for parking, sources say.
Consequently, free parking remains the norm on most healthcare campuses, Mr. Rebora says.
But, with many providers facing a financial pinch, the revenue that could be generated by paid parking simply cannot be overlooked.
For patients, a parking charge does not necessarily affect competition, Mr. Burns says, because their insurance coverage often dictates which hospital they visit.
Parking fees for staff raise tougher issues. Providers worry that making employees pay for parking can hurt recruitment efforts.
Hospitals that do charge employees sometimes offer free parking to attending physicians who office elsewhere, while doctors who are based at the hospital must pay, Mr. Rosenthal says. But, charging some physicians or staff and not others can be a particularly controversial move, some sources warn.
Parking for profits
Despite its pitfalls, paid parking can sometimes be the only way to make a new project feasible.
With the high turnover at most healthcare facilities, even a small charge can generate significant revenue, Mr. Rosenthal says.
He offers an example based on a parking structure that costs $10,000 per space to build, with approximately one parking space for every 200 square feet of gross building area. He estimates debt service at 7 percent, or $700 per year per space, plus $200 for operating costs.
If the ramp is open 250 days per year and each space turns over an average of 4.5 times per day, that is 1,125 turns per space per year. If the ramp is used equally by visitors and staff, but only visitors are charged, each space would generate about 562 paid turns per year. Thus, the garage can cover its costs by charging less than $2 per visitor – a fraction of the general parking fees in most urban areas.
A few strategic moves can also help to reduce resistance to paid visitor parking, Mr. Rosenthal says. He recommends that the building offer validation, but only at a single desk in the building; most visitors will forget or not bother to find the desk. Other strategies are to start with a low fee and gradually increase it, and to only charge by the exit, not by the hour, so patients will not feel they are paying more for parking when a doctor is running late.
Mr. Rosenthal also suggests easing the pain by printing promotional coupons for pizza or movie rentals on the back of the parking ticket. Local retailers are often willing to cooperate on those types of programs, he says.
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