CBD CAR P ARKING - 2 DAVIES AVENUE

Purpose of Report Significance of Decision Reporting Unit Reporting Officer Ward / Community Strategic High Property / Economic Rick Walden - Director Economic Manurewa

SUMMARY
2 Davies Avenue was successfully repurchased by Council in July 2009. Council officers undertook to report back to Council on options for the site after it had been secured. The site is in a strategic location for the CBD development. It is a prominent corner site overlooking Hayman Park and will benefit from the arrival of Manukau Interchange and tertiary campus developments. However, car parking is the key to any future city centre development and this site provides the ideal location to address the problem which has been evident for a number of years (see Appendix B). Initial feasibility studies undertaken have shown that a 600 car park building at a total anticipated cost of $13.5 million is sustainable in this location (see Appendix A). Given the strategic significance and infrastructural importance of providing additional car parking to unlock the site for development, retain existing business in the centre and unlocking other Council owned sites within the City Centre, it is proposed that work commence on securing a Resource and Building Consent for a car park building on the sites as soon as practicable. Provision of $23.2 million over three years has been made in the LTCCP 2009/2019 for funding of the construction of multi storey car parks. Options for development of the site are increased if the site is combined with Councils adjoining site at 8 Davies Avenue. A significant development could be undertaken which takes advantage of the topography of the sites and the aspect overlooking Hayman Park favouring a hotel or residential development. A geotechnical survey has been undertaken and planning advice sought. The two sites are currently used for on grade car parking (leased on 8 Davies and casual on 2 Davies) providing approximately 308 car parks to the city centre (see Figure 1). Any future development will displace these car parks which must be replaced so that the city centre does not reduce its competiveness by increasing the car parking shortfall. By combining both sites a mid-block car park building can be built which could help to service car parking demand from surrounding buildings, service a future development on 9 Osterley Way which is owned by Council and also cater for the car parking requirements for the future development on 2 and 8 Davies Avenue. At a later stage it is proposed to invite proposals for a retail and commercial block plus a 245 bedroom hotel on the remainder of the site.

RECOMMENDATIONS
1 2 That Council Officers proceed to obtain Resource and Building consents for the car park. That Council Officers formalise a development plan for the retail and hotel component of the development so that this can be marketed to the development community a latter date. Once Resource Consent and Building consent is granted Officers provide a further report on feasibility and options available to Council prior to the construction work being tendered.

1.0

Introduction

Site Attributes 2 Davies Avenue is in a strategic location and future development options for the site are also increased if Council combines the adjoining site at 8 Davies Avenue. If the two sites were combined a significant mixed use development could be staged over time which could incorporate retail, hotel and car parking. The development could take advantage of the topography of the sites and the aspect overlooking Hayman Park. A mixed use development incorporating into the design a mid-block car park building would help to service car parking demand from surrounding offices and also provide for future development on 9 Osterley Way which is also owned by Council. The dimensions of 9 Osterley Way are such that only a limited number of car parks would be able to be incorporated in its design. Its true development potential is constrained by limited car parking options. If additional car parking was provided at the combined site on 2-8 Davies Avenue a higher value for 9 Osterley Way could be achieved Any development on the Davies Avenue site will displace the existing car parking which needs to be replaced along with the car parking demand created by the new development itself. As indicated the site currently supplies approximately 308 car parks to the city centre. A mixed use Hotel/Retail development could conceivably create demand for 130 car parks Given the current economic climate it is unlikely that a retail development as of right would be undertaken now, however, it may well become feasible within the next three to five years. A Hotel component is a reality as there are a number of operators who have voiced interest in securing management rights to a Hotel within the City Centre. The major issue at present with the Hotel component is finding a funder/owner of the Hotel and this will continue to be a problem until the wider economy and in particular funding for developments improves. A car park building as Stage One of any development is logical as is serves several purposes as follows. 1. 2. 3. Caters for the displaced car parking on the combined sites. Opens options to develop 9 Osterley Way. Supplies car parking for Stages 2 and 3 of the development thereby increasing the values for these stages as a developer will not have to supply car parking but lease them from the owner of the car park. Allows adjoining Council owned sites to be developed as the car park will provide car parking spaces for those displaced and also allows additional car parking spaces to underpin those developments. Transfer of leased parking on Lot 59 freeing up space for MIT car parking needs, or Park and Ride.

4.

5.

(See Figure 1 below for site location:)

2 Davies Avenue

8 Davies Avenue

9 Osterley Way

Figure 1 Manukau CBD site location map

2.0

Increasing requirement for Car Parking. There are several proposed developments as part of the Revitalisation Project that will generate the need for additional car parking within the city centre, these are:2.1 Confirmed commitments Rail Interchange - 140 car parking spaces to satisfy District Plan obligations. Ministry of Justice requirement for a further 250 car parks to meet proposed expansion plans. Manukau Institute of Technology 500 car parks for staff and students for their initial uptake. This could be offset in part by relocating leased car parks into the car park building allowing the western end of the Councils parking (Lot 59) to be leased to MIT. 2.2 2.3 Developer interest in the site at 9 Osterley Way. Another developer interested in Stage 2 and 3 of Davies Avenue.

3.0 3.1

Council, Parking and City Centre Development (see also Appendix B) As the regulator of infrastructure Council is in the best position to further develop an effective parking strategy which can address the current needs of the city centre, serving as a provider of parking within the City. Additionally purpose built parking buildings, run as a profit centre, assists development through solving a long term problem developers face when contemplating investment in the city centre, namely how do they make a project viable considering the degree of parking that is required to be provided for each development? Encouraging revitalisation of the city centre by

reducing development restraints, often attributable to the quantity of car parking required to be provided; will change the development model in favour of investment through more efficient parking structures. 3.2 The immediate need is to provide for the undersupply of parking that is currently destabilising and constraining growth in the city centre and indeed is at such a premium that it is now in danger of creating a decline in real time business activity. Although private sector investment is not out of the question in the current economic climate there is limited interest from the private sector to own and develop parking buildings, however, the demand for long term lease parking for existing and potential businesses in the city centre may mitigate this reluctance to invest. In addition, any developer would require an income stream guarantee and assurance from council that the proposed revitalisation of the city centre is not only confirmed within the LTCCP, but has a realistic and progressive time line. Financial Analysis The project will not generate significant financial returns to council. Based on initial financial analysis undertaken, the project will breakeven and recovers councils cost of funds. The project generates a marginal net present value of $191,000. (See Appendix A). The main upside for the project will depend on how soon the immediate development around the car park (retail and hotel) will come on stream as this is likely to result in greater utilisation and occupancy of the car park. Other surrounding developments like the rail station and MIT campus is likely to have a positive impact on occupancy. Initial estimates to construct a 600 bay car park is $13.5 million and this is made up as follows (additional levels will be added as demand increases); Construction of structure (Initial 600 bays @ $18,500/bay) Fees and consents Contingency Total Some key financial assumptions used in the analysis are as follows: Assumptions Leased bays Casual bays Initial set-up 150 450 Comments Will increase as development demands. Will decrease as more bays are allocated to lease parking. Parking bay on Lot 59 leased for $137 per mth $8 per day Used for both income and costs $11.10m $1.18m $1.22m $13.50m

3.3

4.0 4.1

4.2

4.3

Monthly lease rental per bay Casual bay charge per hr Inflation Annual opex per annum Cost of funds Estimated occupancy

$160 $1 3% $220,000 6.8% Starting at 60% from year one and reaching 90% by year seven.

Leased bays are fully occupied from year one.

As demand for secure leased parking increases, additional casual space can be allocated to lease and eventually when demand reaches a 50:50 basis additional floors can be added to the car park building.

5.0

Conclusions

5.1 Council should be in a position to manage and control the supply and cost of car parking within the city centre. 5.2 Of the options available that of Council owns, builds and operates appears the most favourable at this time. It would ensure council control over a major aspect of city management and its future development in accordance with the City Centre Revitalisation Master Plan. 5.3 To provide sufficient parking to meet current needs and in contemplation of future development and growth of the Manukau city centre, Council needs to embark on a well thought out construction programme of parking buildings to free up development sites. 5.4 Councils Parking Strategy should be expanded to incorporate Council being the lead provider of parking infrastructure in the Manukau city centre and that forward planning of further parking buildings be pursued and considered as part of infrastructure development and revitalisation of the CBD. 5.5 The attached appendices outline the financial considerations regarding a proposed car park building on council owned land at Davies Avenue, Appendix A; and the history behind the requirement for car park buildings as Appendix B. 5.6 It is envisaged that Stages 2 and 3 of the site development be deferred until the economic climate improves so that the Private Sector are confident of the investment required. The mid-block aspect of the car park building will mean that it is fully hidden from view when stages 2 and 3 are complete helping to hold down the construction cost compared with an open aspect proposal. The proposed design would enable additional floors to be added 100 additional car spaces per floor as demand increases following the development of the CBD in accordance with the plan at a much lower cost. 5.7 The change to Auckland Council in October 2010 will begin to have an impact on infrastructure developments long before the actual change over as ATA will feel reluctant to approve large scale projects in the months approaching appointment of the new CEO (expected June 2010). Consequently, it is felt that approval of this project should be progressed accordingly as it is already approved in the LTCCP 2009-2019.

6.0

Suggested Timeline: Presentation to ELT Council Forum P&A Committee 23 September 2009 8 October 2009 13 October 2009
th th th rd

Submit to ATA for confirmation of decision:- 14 October 2009 Detail design: November 2009 Resource Consent application:- December 2009 Request for tender December 2009 Tender Panel: January 2010 Submit to ATA for approval: February 2010 Contract award:- March 2010 Construction commences:- April 2010

2 Davies Avenue Carpark Development

Assumptions: Permanent Bays Casual Bays Total Bays Permanent Bay Rental Casual Bay Charge Casual Bay Usage Initial Opex CPI Other Income Rates Monthly Parking Annual Rate Inc Construction cost per bay Cost of capital Gross Income Permanent Bays Rate/Month (incl GST) Bays Rented Permanent Income (excl GST) Casual Bays Average Occupancy Rate/Hour (incl GST) Bays Occupied Casual Income (excl GST) Parking Income (excl GST) Total occupancy Other Income (excl GST) Total Income (excl GST) Costs (excl GST) Rates etc Operating Expenses Total Costs Net Income PV of Net Income (for 25 yrs) PV of Terminal Value (after 25 yrs) Estimated construction cost Net present value 150 450 600 $160.00 $1.00 8 $170,280 3.00% $0 $50,000 21.50 3.00% $18,500.00 6.8% Year 0 bays bays bays p/month p/hour hours/day p/annum p/annum p/annum p/annum days p/annum

APPENDIX A

Year 1

Year 5

Year 10

Year 15

Year 20

Year 25

$160.00 150 $256,000 60% $1.00 270 $495,360 $751,360 70.0% $0 $751,360 ($50,000) ($170,280) ($220,280) $531,080 $10,521,725 3,169,509 ($13,500,000) $191,234

$180.08 150 $288,130 80% $1.13 360 $743,376 $1,031,506 85.0% $0 $1,031,506 ($73,205) ($191,652) ($264,857) $766,650

$208.76 150 $334,022 90% $1.30 405 $969,499 $1,303,521 92.5% $0 $1,303,521 ($117,897) ($222,177) ($340,074) $963,444

$242.01 150 $387,223 90% $1.51 405 $1,123,915 $1,511,138 92.5% $0 $1,511,138 ($189,875) ($257,564) ($447,439) $1,063,699

$280.56 150 $448,898 90% $1.75 405 $1,302,925 $1,751,823 92.5% $0 $1,751,823 ($305,795) ($298,587) ($604,382) $1,147,440

$325.25 150 $520,395 90% $2.03 405 $1,510,447 $2,030,843 92.5% $0 $2,030,843 ($492,487) ($346,144) ($838,631) $1,192,212 17,532,527

APPENDIX B History and Background

1.0 Car Parking City Centre Analysis undertaken by independent consultants indicates that current parking facilities within 4 the city centre are serviced by 500 fewer car parking spaces than the District Plan requires . It is important to note that this shortfall does not relate to car parking provided on street for casual users but to the existing buildings requirement within the city centre. Westfield have been forced to limit parking time to 90 or 120 minutes at the South side parking and 360 minutes at their new North side parking to prevent office and shop workers from occupying free parking spaces all day. This has effectively forced office and shop employees to take up the all day parking available on city streets, thereby reducing available car parks for visitors and casual users to buildings on that street. The Built Form and Spatial Structure for the future Manukau City Centre, commissioned by 2 MCC , recommends a pedestrian friendly environment in keeping with most modern city trends. This would mean a reduction of on street parking for areas within the main city block (Putney Way, Osterley Way, Amersham, etc) putting even greater strain on existing parking facilities. Manukau city centre is in competition with other locations within Manukau and Auckland City to attract and retain corporate tenants who prefer a convenient location. A major driver in any tenants decision regarding preferred location is the transport infrastructure and the availability, type and cost of car parking. Whilst new roading and the rail link enhance the desirability of locating to Manukau CBD, the problem of car parking has a more powerful negative effect. The existing shortfall of parking provision within the city centre creates an immediate disadvantage in retaining, attracting and securing new and corporate tenants. Examples of this are:(i.) The Ministry of Education (a Tomorrows Manukau partner) are currently considering relocation from Manukau CBD, the main reason being that they need 100 car parking spaces which are currently unavailable. CST Nexia are also considering alternative premises outside the CBD, the only options which satisfy their car parking requirements are not in the city centre. Genesis Energy has already relocated from the city centre due to their inability to secure sufficient numbers of car parking spaces to meet their operational needs. They have relocated to Greenlane and are lost to Manukau from both the revenue and kudos aspect. ACC also moved from the city centre due to a lack of available, secure parking facilities for staff and clients. IRD could not be enticed into the proposed development on Lot 59 as only 200 parking spaces could be provided in the building and no guarantee of additional spaces could be given.

(ii.)

(iii.)

(iv.)

(v.)

Once tenants have chosen to relocate it is extremely difficult to attract them back, they are unlikely to return until the end of their lease which may be nine or twelve years hence and by then the cost of further relocation makes it unlikely that they would return at all. 2.0 Displacement of existing Car Parking facilities With the Manukau Rail Interchange due to be completed by 2011/2012, the use of part of Lot 59 will alter from on grade (street level) car parking to a rail terminal/station and potentially associated commercial development. This change in use will displace existing car parking and by virtue of development create demand for even more additional car parking.

It is anticipated that the area at the rear of Kotuku House (currently at grade car parking) will be developed as residential apartments for students/lecturers and others displacing 300 car parks many of which are leased to local businesses. Development of the lower western end of Lot 59 adjacent to the rail terminal would permanently displace another 140 car parks (plus many others during the construction phase) most of which are currently leased to businesses, exacerbating the issue of relocation as discussed above. 3.0 Future City Centre Development Council is the predominant land owner in the city centre and development activity has all but ground to a halt in recent years. Virtually all of the potential development sites within the city centre are currently allocated to on grade car parking. Council is the owner of most of these potential development sites and in order to make them available for development the current function for car parking needs to be diverted to free up each sites potential. The most efficient and effective method of releasing these sites is to build car parking buildings (multi storey) to absorb these cars; the alternative being encroaching into Hayman Park or putting more on grade car parks south of the new motorway. These options are not conducive to city revitalisation and growth. Further, the development of car parking buildings will allow additional car parking space to be created more cost effectively (six or more levels of parking as opposed to one on grade level in the same space); and allow economic development of the freed up prime land sites. A car containment parking system will also improve revenues and the security for Manukau visitors, residents and business rate payers. The current Pay and Display system for on street parking is abused by many and the high cost of recovering Parking Infringement Fines (currently less than 15% of fines are paid without court action) would indicate that a more practical solution is required. Car park buildings ensure parking payment is collected before the vehicle is able to exit. From a security point of view, containment parking is a more secure environment than widely spread on grade and street parking particularly after hours, thereby encouraging use of the city centre at night and weekends. A recent report highlighted the need for a closer look at security in city centre car parks with statistics from NZ Police showing that theft of cars and from cars amounted to 39% of all reported crime in the city centre. 4.0 Parking Strategy (District Plan 2002)
4

Clause 8.19 & Clause 8.20(d) of the District Plan details Councils Parking Strategy. 4.1 There is a need to quantify the costs associated with providing Council funded car parking and to assess mechanisms required to fund these developments in the short term while under construction and in the future should it be determined that these buildings require rate payer subsidisation. 4.2 A fundamental element to the parking strategy is the acknowledgement that a shortage of parking has a negative economic impact on the viability of existing business. It is also a major constraint on the growth of those businesses. If additional car parking is made available this will attract new businesses and developments which will result in growth of the rating base. 4.3 The question is whether parking buildings are the best form of parking infrastructure to be considered in association with the overall parking strategy of the city and who should own and operate them. The conclusion is that there needs to be a strong correlation with such initiatives as the Pay and Display parking and the use of these buildings as a primary source of parking to economically provide for new development and the current supply shortfall.
Reference documents: 1. Economic Futures Report and Business Case Stage 1 (for LTCCP) Ascari October 2008 2. Manukau City Centre Built Form and Spatial Structure Plan RSA Sept 2008 3. Manukau City Centre Revitalisation Project Development Plan Incoll May 2008 4. Manukau Operative District Plan 2002