Prospective buyers of property for retail development face a plethora of issues when negotiating a purchase from a potential seller. Aside from the obvious issues of purchase price, contingencies and financing, prospective Southern California buyers are also confronting issues related to the availability of parking. As developers try to maximize their leasable footprint, there is a growing trend to look to subterranean parking, according to James W. Abbott, Jr., a broker at Realty Advisory Group in Los Angeles, California, who specializes in retail and institutional sales in the hot Venice Beach area.
Abbott explains that, “A potential developer is going to want adequate parking for the retail development. If the existing parking areas aren’t sufficient, one way to do this is to construct a subterranean parking garage.” In Venice Beach, however, it isn’t always that simple. Abbott points out, “In many parts of Venice, the water table is only about eight feet below ground—so constructing subterranean parking is often economically impractical.”
Even if subterranean parking does make economic sense, there are lurking land use and entitlement issues, including (1) how many parking spaces the municipality requires, (2) do the current entitlements allow the construction of a subterranean parking garage as a matter of right, and (3) what are the ADA challenges. In order to minimize permitting costs during development, thorough due diligence during the escrow is crucial. A sufficient due diligence period—or one that is flexible and can be extended by the buyer (sometimes in return for an increase in the deposit)—is imperative. Also important is having the right experts on the team to provide reliable advice.