Property Without Adjoining Parking Lot

[Gobears81]

All

I may be appraising a commercial property which has a parking lot (and entrances) on the east and west sides of the building. The west lot line for the parcel that is owned in fee encompasses sidewalks and a row of parking spaces. But the driveway to get to said parking spaces, as well as additional parking spaces to the west, were previously leased by a separate entity. The improved property in question is now vacant and the land lease on the adjoining parcel that was used for additional parking has lapsed. This (parking lot) parcel is narrow and basically has one potential purchaser (technically two, but knowing the characteristics of the other adjoining property it is one). The owner of the improved property is in a bind as the viability of the property hinges on getting use of this adjoining parcel back via either purchase or lease. My initial impression would be that the owner of the vacant parcel would also be motivated to work something out also because his parcel is nearly worthless without being assembled with this adjoining property. But, he is asking an astronomical amount for purchasing this property, which I suppose is based on the assumption that he holds the cards, not the owner of the improved property. As a side note, some of these land leases sound great early on, but I'm seeing how problematic the old/ expiring land leases can become. Anyways, what is your thoughts on how to approach this appraisal knowing these facts- it almost sounds like a scenario analysis type of approach. Would that change if it were for ad valorem?

 

[Artemis Fowl]

I would think not: ad valorem = at value
If I became aware that a property was losing it's parking utility we'd definitely be considering value effect for ad valorem.

The owner can ask whatever he/she wants for price but that shouldn't affect market value or whatever similar-type definition used. Perhaps provide a with/without analysis? Maybe mention that both parcels would suffer.

 

[Zephyr999]

Wouldn't there be external obsolescence to the improvements without the parking? What are the rent differences for similar properties under this influence?

 

[Gobears81]

Wouldn't there be external obsolescence to the improvements without the parking? What are the rent differences for similar properties under this influence?

There certainly would be a loss. The difficulty in proving this since most of the non-Downtown properties of this type in this town and comparable communities have ample parking, or at least better parking than this one would. The Downtown properties have nearby parking lots and a superior infrastructure for pedestrians, so extracting a rent differential from those would be awkward. But I agree with you

 

[Meandering]

The improved parcel is currently vacant?

Are there uses of the building which require the additional parking space, per zoning, that would impact the next potential use of the building, if the additional parking spaces were not accessible?

If the other guy's lot is the only way to access the parking area of the improved lot, couldn't the owner of the improved lot apply for an Easement Appurtenant if the unimproved lot owner refuses to make a deal within the range of reasonable prices for access easement?

.

 

[Zephyr999]

The improved parcel is currently vacant?

Are there uses of the building which require the additional parking space, per zoning, that would impact the next potential use of the building, if the additional parking spaces were not accessible?

If the other guy's lot is the only way to access the parking area of the improved lot, couldn't the owner of the improved lot apply for an Easement Appurtenant if the unimproved lot owner refuses to make a deal within the range of reasonable prices for access easement?

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I understood the adjacent property that had a lease for the access point to be improved but currently vacant building . I also wondered what zoning required for parking...gaining an easement because the seller sets a high price? Doubtful...

 

[Deleted member 152047]

Wouldn't there be external obsolescence to the improvements without the parking? What are the rent differences for similar properties under this influence?

This is functional, not external.

 

[Zephyr999]

This is functional, not external.

Oy, right you are.

 

[Deleted member 152047]

I would develop both values, with and without.

As far as determining the value of the without, that is tough. How much data is available in the market area? I recently did a parking study for an ED project that I was working on. I basically looked for any sales of properties with sufficient vs underparked properties and attempted to extract a per space adjustment.

It took a couple of days to put together and I couldn't prove a dimunition due to the property type (industrial). This is easier to prove for office and retail.

At least if you go through the process, get some broker interviews, and potentially investor interviews, you can put it all in the report and conclude to an x% discount due to diminished functional utility. Without direct comparable data, I doubt anyone would argue with you.