Call it the 18-minute real estate transaction.
When Dennis Kluge’s neighbor sold his studio apartment at 1340 N. Dearborn Pkwy., the buyer didn’t want to pay for the accompanying parking space. The neighbor put up a note in the building offering the deeded in-building spot–and within 20 minutes had sold it for $25,000, says Kluge.
The deal impressed–and pleased–Kluge, owner of four condos and four parking spaces in the same vintage building.
Kluge recently had his property appraised and was delighted to learn that the apartments each had appreciated 150 percent in the last 18 years. In the same period, the parking spaces, purchased for $2,500 a piece, had skyrocketed a whopping 1,000 percent to $25,000 each in value.
“I’m never going to sell,” he says.
“My twin brother lives in Niles, Mich., and several years ago he bought a four-bedroom, tri-level home with a pool for $105,000–about what my four parking spaces are worth.
“He loves to tell his friends that his house cost as much as his brother’s parking spaces in Chicago,” laughs Kluge, a principal in Landahl Design Studio.
Parking traditionally has been at a premium in the Loop and Near North Side, but residents, real estate agents and city officials agree the current development boom and the changing demands of many new residents are pushing prices ever higher. It is producing a wave effect, some claim, that extends in a growing circle around the downtown area.
“It is an increasing problem,” says Ald. Burton Natarus (42nd), chairman of the Chicago City Council’s Committee on Traffic and Safety.
Kluge says his business partner lives in a building on East Walton Street that converted from apartments to condominiums, but where no parking was sold to residents.
“He now pays $400 a month to park his car–that’s $5,000 a year non-deductible,” exclaims Kluge, contrasting the parking cost with the mortgage interest payments that property owners can deduct from federal income taxes.
Paying for parking is “like having a kid at the University of Illinois,” says Helen Schubert, who heads Helen C. Schubert & Associates, a public relations firm. She has lived and worked on Chicago’s Near North Side for more than 25 years.
Schubert pays $230 a month for an enclosed subterranean space two blocks from her Lake Shore Drive apartment. While such a monthly fee may seem stiff to most suburbanites and the residents of most Chicago neighborhoods, Schubert says it is not solely for the convenience of having a sheltered space. The alternative is paying a city fee for an on-street residential parking permit, the time and cost of gas expended looking for a legal space and the hefty fines each time you fail to move the car on street-cleaning days.
As Natarus sees it, “This is primarily a problem of the Loop and downtown. Currently the downtown area is short of parking because we are in a building boom, particularly in the area east and west of Michigan Avenue between the Chicago River and Oak Street. The shortage of parkage has caused a boost in the rates of the remaining parking.”
The alderman, whose ward includes the Loop, North Michigan Avenue and the Gold Coast, credits the efforts of Mayor Richard M. Daley and his administration for making the city attractive to buyers, including those with growing families. But with the success has come higher parking prices, which Natarus says “started to accelerate with the advent of the success of Navy Pier. That project is dynamic, especially in the summertime. And it is likely to be even moreso as the Shakespeare Repertory Theater moves in there and they are booking some conventions.”
Others suggest it is the result of longer-range trends.
Kevin P. Maloney, president of Maloney Appraisal Co., 2446 N. Clark St., says rising parking space prices correspond with growing real estate values.
“Just like the prices of real estate” the cost of residential parking in some neighborhoods “has increased dramatically. Some parking units sell for as much as $50,000,” says Maloney.
He attributes Chicago’s strong housing market to “a desire to live in the city by young people, a return to the city by empty-nesters, and the increased acceptance of condominiums.”
“At one time there was a prejudice toward condominiums,” recalls Maloney, but “that is no longer evident.”
And that change has added a new element to the historic urban residential equation.
As recently as 25 years ago, most householders chose between living within convenient walking distance to jobs, shopping, restaurants and entertainment or opting for a yard and more space in the urban edge neighborhoods or in the suburbs.
Typically, those in the city were apartment dwellers who rented and used public transportation or cabs. Those living in outlying neighborhoods and suburbs drove cars everywhere.
But converting apartments to condominiums has turned renters into homeowners concerned with equity and resale value as well as convenience.
Chicago’s natural lakeside setting combined with its success at maintaining the vibrancy of its urban core has drawn more buyers back downtown, so there is, perhaps, an inevitable culture clash between the old and new, the urban and suburban.
Young people who grew up in the suburbs and now have growing families themselves may see the city as a more viable place to live. Empty-nesters who want the experience of living in a city or who left the city to raise families are returning. But, many of the newcomers, say developers and city officials, are loath to leave habit and autos behind.
Jon Tilkemeier is a executive vice-president of Sundance Homes, which for the last two years has been developing residences in the city. Its Chicago Urban Properties division is the developer of Erie Centre, a loft project incorporating three adjoining warehouses dating from the turn of the century and a new, 24-story tower at 375 W. Erie St.
When it comes to parking spaces, buyers for the Erie Centre residences are “a total mix,” says Tilkemeier: “Some don’t want any. Some want two spaces.”
Those who don’t want to buy parking usually are “younger, just starting out, living in the city.” Those who do, typically are “empty-nesters moving back from the suburbs and owners of two, if not three, cars. They are used to walking out the door and jumping in the car.
“It is essential to offer parking,” says Tilkemeier about the firm’s response to perceived buyer demand, particularly from those presumably with the most disposable income. “We always try to offer 1 (parking space ) to 1 (residential unit).”
Developers must satisfy city officials and community groups before any project gets off the ground.
Although the number of spaces possible may vary in buildings converted to condos, Natarus takes credit for an ordinace that went into effect in early 1998 that “all residential zones with high-rise (R6, R7, R8) buildings should have 100 percent (1 parking space for each residence) or we won’t approve it.”
Planned unit developments, however, are subject to different rules, which date from 1985.
Current zoning regulations require off-street parking with any new single-family dwelling.
Community groups often “ask for 1.5 park spaces per unit,” says Jeff Gelman of Chicago Capital Consultants, developer of Gallery 400, a $32 million high-rise and mid-rise loft condominium development at 400 W. Ontario St.
And what about guest spaces in new residential projects?
“Nobody’s giving away space,” notes Gelman, who says the cost of building each 8-by-19-foot parking space is about “$18,000 for brick and mortar. I’m not talking the land. I’m not talking the soft costs.”
Developers determine the price of each space with the “same formula as with any housing where the land costs and revenue needs are calculated,” says Tilkemeier. “If a price says it `includes parking,’ I guarantee you it is buried in the costs.”
The formula means that during one recent week the price of permanent residential parking ranged from $9,800 for an outdoor space at The Beacon Lofts, 927 W. Adams St., to $35,000 for a tandem, or a stall big enough for two cars, at The City Center Club, 212 W. Washington St. Parking prices can vary according to size, degree of convenience and location.
Buyers now need to acquaint themselves with a vocabulary of terms, including single, tandem, deeded and assigned, to describe the specifics surrounding parking a car.
And like other highly prized amenities such as up-to-the-minute kitchens and all wooden floors, deals on parking spaces are routinely offered by developers to woo and win buyers.
“Preconstruction deals for parking spaces are the same as for other preconstruction incentives,” says Tilkemeier. “They are offered to those early buyers willing to put money down based on a blueprint and model rather than those who wait until the building is up.”
As was the case in one recent project, a $17,500 space in the preconstruction phase may cost $25,000 as a building approaches closeout.
Outweighing convenience for many buyers is current hot demand.
Most buyers feel “there is no second market (resale) without it,” Gelman says.
Residents of older buildings without parking have apprehensions about resale. And some condo owners are scrambling to find or buy additional parking.
The homeowners’ association of one vintage building in Lake View explored the possibility of buying property on the same block to build a garage.
Owners of million-dollar residences in big turn-of-the-century lakefront buildings without parking now vie for space with neighbors in adjacent buildings, says Nancy Joyce, an agent with Baird & Warner.
“Multiple parking spaces. That’s really top-of-the-line,” she says.
“Some buildings with parking want to install additional parking for two cars,” says Natarus.
City officials who take the public heat for many of Chicago’s parking woes note that in the current climate parking has become a business.
“We have heard that there are developments where the parking is a money-maker. The owner, operator, developer (who) is making money from the parking, which is prohibitive or unavailable to residents,” says Chris Slattery, deputy commissioner for zoning in the Chicago Department of Planning and Development.
Even when developers “follow city guidelines, it is difficult to determine how many are for residential use and how many for commerical,” says Slattery of mixed-use projects which include residences, commerical and parking.
And private developers are not the only ones interested in making money, suggests Tom Smith, director of development policy for the Department of Planning and Development.
“It works both ways,” says Smith. “Sometimes homeowners’ associations find they can get more money from leasing parking places and leaving residents out in the cold.”
“The big commercial developments like Nordstrom, McLean (Dan McLean’s River East) . . . are eager for parking,” says Natarus. “They are asking for it. Parking is a source of revenue. It is a necessity to sell the project.”
Some buyers have an “amazing lack of reality” about living in a urban area, says Slattery.
Smith notes that buying a luxury-priced home in the popular and increasingly pricey Lincoln Park and Lake View neighborhoods does not entitle a homeowner to a personal parking space on the street directly out the front door.
“Historically, the city was more dense than it is now,” he says.
Furthermore, while there clearly will be short-term disruptions and shortages in some fast-developing areas such as along Grand Avenue from State Street to the lake, Natarus says in the long run “the developments now being built will have plenty of parking once the projects” including one with a 1,500-car garage and another with a 900-car garage, are completed.
What of the future?
Appraiser Maloney declines to hazard a guess.
New developments are typically adding adequate parking, he opines.
As for the impact that a lack of parking might have on resale of a residence, he insists, “Each residence is individual. It depends upon the density of the neighborhood. With larger units in high-density areas, it is extremely important. But there is no rule of thumb. There is no generic formula.”
The lack of parking might lower the resale price of a home by as little as $3,000 or as much as $40,000, Maloney said.
Tilkemeier thinks the option of buying a parking space is perhaps more important than the perceived need.
Pointing out that one can live quite comfortably in downtown Chicago without a vehicle–and save a lot of money–he suggests demand for parking may be as much a matter of psychology as practicality.
“One hundred percent of all customers want the opportunity to buy a parking space,” whether they purchase it or not, he says. “It’s a psychological thing. Everyone likes to think `I made the choice.’ “
Furthermore, says Tilkemeier, compared to the prices and congestion of New York City, another urban center with residential living amid a vibrant downtown, “I don’t think Chicago is there yet.”
Maybe not. But Dennis Kluge is hanging onto those parking spaces–just in case.
