We previously wrote about how on-demand delivery services, such as Uber and its competitors Lyft and Postmates, have the potential to provide brick and mortar retailers with an answer to Amazon’s delivery service. Services such as UberRush now allow retailers to serve customers who are looking to skip the shopping trip entirely by providing on-demand delivery. But on-demand mobility companies such as Uber can also be relevant to customers who want to shop in-person, and for landlords who subsidize parking there may ultimately be cost savings or other advantages in partnering with such companies.
It’s no secret that car-ownership and usage patterns are changing, and it’s not surprising that retailers generally have much more parking than needed (even on Black Friday). And often, municipal parking regulations may cause more parking than is actually needed. For retailers and landlords in urban areas, it may be more cost-effective to subsidize the cost of rideshare as part of a shopping experience than to subsidize on-site parking. And Uber may be a willing partner.
Recently Uber announced a relationship with a multifamily residential development in San Francisco. As part of the deal, the developer of the 8,900-unit residential project provides a $100 per month stipend to residents for Uber and public transit use, and Uber, for its part, caps fares between the project and the public transit station at $5 per ride. The developer hopes to save money by not requiring as much parking on-site, although at this point the project is still under development (as many as 5,600 of the total 8,900 units are not yet built).
Shopping center owners and retailers currently provide a significant subsidy to customers in the form of abundant customer parking. In urban shopping centers, the cost of this subsidy may be shared between the landlord and the tenant in the form of a parking validation system where the nominal charge to a customer for parking is waived or reduced. In suburban locations, parking is usually entirely “free” for the customer, and the cost of owning and maintaining the parking field is either incorporated into rent and CAM or borne entirely by the landlord.
Shopping center owners may be able to unlock development potential in their parking fields, or lower their capital and operating expenses, by subsidizing customer trips rather than customer parking, and on-demand mobility services provide the technology to make that possible. To make this arrangement attractive to the customer, the landlord and its tenants could provide a subsidy for the cost of the customer’s ride home (ideally with a car full of purchases) just as they currently provide a subsidy for the cost of parking validation.
The use of Uber to generate retail traffic has already proven successful at a shopping center north of San Diego, California, where a landlord used Uber vouchers of up to $25 each way to combat a parking shortage at its shopping center. In fact, the program was so popular the Landlord shut it down after just over a month because of demand. However, when planned in advance (e.g., when the concept is addressed in leases and/or on-site parking is reduced or redeveloped), on-demand mobility services present not only an opportunity to reduce parking capital and operating costs, but also to attract new, car-less customers who may otherwise be satisfied to shop on-line from home and not make the effort to travel to a brick-and-mortar store.
Significant parking subsidies are currently baked into the retail format, but with the advent of on-demand mobility, there is an opportunity to change that and potentially realize cost savings and other advantages. A key component to making this concept work will involve planning for it in leases with retailers, financing documents, and entitlements.