This is why you should abolish the block rent and take control of your parking business

We have previously referred to the difficulties that arise when two systems, or actors, which had previously been completely independent of each other, are to begin to cooperate. In the following article we go into the pros and cons, as well as the consequences that block leases bring for property owners, and what alternatives exist.

When you rent out your parking spaces in a block lease agreement, you also lose the opportunity to influence the parking offer.

Five consequences of block lease

A common reason for renting out your parking business is that it is perceived as complex and difficult to manage, but contracting out the management and availability of your own parking assets has consequences in both the short and long term:

1. No impact on customization and NPS

When you rent out your parking spaces in a block lease agreement, you also lose the opportunity to influence the parking offer. Whether the needs of tenants for, for example, electric car charging are met, and what it costs, is entirely up to the operator (who is formally the tenant). An operator who does not necessarily attach much importance to your Net Promoter Score (NPS) or whether their revenue comes from a price increase, electric car charging or checking fees.

2. The Tenancy Act provides for a legal lock-in

Block leases are governed by the Tenancy Act, which can mean large lock-in effects on the parking deal due to the indirect tenure protection. For example, a property owner who wants to create a more flexible rental in their parking facility in the form of unreserved spaces cannot make such decisions because the existing block tenant decides over the use of the facility and has tenure protection under the Tenancy Act when it is time for a change of conditions.

3. Long agreements risk lost revenue

Until a few years ago, block renting with long contract periods was still a reasonable solution, as it didn't happen very much on the parking front. But now that we are in the midst of a societal transformation in which electric car charging and mobility are the focus, we cannot say for sure what opportunities will open up tomorrow — opportunities that property owners who have entered into long block leases then miss out on being able to offer. One thing is certain: by contracting out your own disposal, you as a property owner lose much of all the upside to possible service development of the parking spaces. An upside that means both increased revenue and satisfied customers.

4. The car park is isolated from the rest of the property

Parking spaces are and should be seen as part of the property, and one creates problems for overall management when isolating the parking assets in a block lease. If you want to be a forward-thinking property owner who keeps up with, for example, digitalization, electric car charging, and Smart Building trends, you need to have a unified strategy for your entire property. If the parking lot is then isolated, the possibility of offering a user-friendly access solution or load balancing the electricity consumption for electric car charging and the rest of the property is lost.

5. Financial security

However, block leases have a beneficial consequence that we should not stick under the chair with. When you rent out your assets against a fixed rent, you have great financial security in that deal. Provided that you have chosen to rent to a stable operator, you know what parking revenue you will have during the contract period, without depending on occupancy, which may be a prerequisite for obtaining external financing such as bank loans or similar. If you choose to prioritize this, you should still consider including requirements for value-added services and dialogue about the offer in the contract. A loosening of the old system has begun and is working towards greater collaboration between property owners and operators.

The parking spaces are and should be seen as part of the property, and you create problems for overall management when isolating the parking assets in a block lease.

Three Ways to Manage Your Parking Assets as Alternatives to Block Rental

The first step for property owners who want to take control of their parking business is to decide whether or not to manage the management on their own. If you choose to bring in an operator, you should look at a more flexible form of agreement that leaves more availability and transparency than the block lease does.

1. Turnover-based lease

In short, a turnover-based lease is a good fit for a property owner who does not have the resources to manage their own parking assets, nor has any strong thoughts or strategies around how the management should be conducted. Then you bring in an operator who has a modern and customer-friendly brand, is good at parking and can drive and optimize the work towards a share of the turnover.

2. Management agreement

Are you a property owner with a strong own brand, who has your own ideas and strategies on how parking should be conducted in your business? Is it important for you to have control over what services should be offered, what it should cost and how it should work? Do you also want the parking services to be associated with you and partly carried out in your name? In other words, if you want to have discretion over the whole deal, but do not have the resources to pursue it, then you should look at a management agreement.

In management agreements, you hire an operator who carries out daily operational activities on your behalf, while as a property owner you have 100% visibility into the transaction. This means that one has the same prerequisites for drawing conclusions about how to optimize the business. The agreement is more of a partnership, where the operator is an expert in parking, while the property owner is an expert in and anchors the parking in the rest of the business.

3. Digitalised parking management

Of course, you can also take care of the parking business yourself, we have several customers who have chosen to do so. Moreover, with a digital ERP system for parking management, it becomes much easier than if you were to manage everything manually in different systems.

Here you can read about the benefits of digitized parking management and how it works.

However, there is nothing that says you have to look after the whole affair on your own - it is possible to split up the administration. You can manage some indoor parking facilities and outsource others to a parking operator through, for example, a management agreement.

If you and your operator use the same Parking Management System, you also get a comprehensive overview of the aggregated data from all your facilities — both those that you manage yourself, and those that your operator takes care of. All the data you need to run and optimize your business is then gathered in one place.

If you and your operator use the same Parking Management System, you get an overview of the aggregated data from all your facilities

How to avoid the pitfalls

In summary, there are alternative forms of agreement that give you greater control over your parking assets than the traditional block lease. Before you make a decision about what you want to do, think about:

• What do you risk losing by renting out your parking business with a block lease — today and in the long term?
• What are the prerequisites for managing parking on your own?
• If you want to hire a parking operator for all or part of the deal, which form of agreement best suits your needs and opportunities?

Still unsure? Welcome to hear from you if you want to discuss your options or learn more about how digitized parking management can contribute to your parking business.