Are Parking Spaces in Chicago's South Loop Over Valued? This is a question a friend of mine and I debated a little one night last weekend.
We both live in one bedroom units in Chicago's South Loop, but in different buildings.
The conversation started when I told her that there was a parking spot for sale in our building and my husband and I were a little sad that we cannot afford to buy it. Banks are not offering unsecured loans, so the only way to get it would be to refinance our condo, but we just did that a few months ago. She asked how much the space was listed for and I told her.
"That's ridiculous! It really makes me mad that parking spaces in the South Loop are so over valued! I'm never going to buy a parking space unless it is with the condo I am purchasing. We looked into it before. The average asking price is $30k, but they only add $10k of value to the property!"
I won't disagree that parking in the South Loop is expensive, but I had to question her $10k theory. In the past year 8 parking spaces sold in the South Loop (including area 8032 south of Congress) the average selling price was $31,250. The South Loop area is very large and in both buildings parking spaces can only be sold to unit owners, so it's hard to compare them with other buildings, they are each a different market. I compared 1-2 bedroom units in our respective buildings that sold with and without parking in the past year.
Only one unit sold in her building without parking. It sold for $234/sq ft. The three with parking sold for an average of $239/sq ft with a standard deviation of 32. I added in the standard deviation at the request of my husband, but I don't remember learning about that in math class. Hopefully this gives someone more information than it does me and you can explain it to me! Anyway, had the unit without parking sold for $239/sq ft like the ones with parking it would have sold for only $3,476 more.
Three units sold in my building without parking. They sold at an average of $241/sq ft with a standard deviation of 23. The average price per sq ft for the five units that sold with parking was $264 with a standard deviation of 19. Had the units without parking in my building sold with a spot at the average price per sq ft that those with parking did one would have cost $880 less, one would have cost $25,548 more and the other would have cost $60,200 more.
What can I deduce from these numbers (with my severe lack of understanding how to apply the standard deviation once you have it)? It seems to me that as far as her building goes she is probably quite right. The parking spaces are overvalued in respect to how much value they add to the home as a whole.
In my building these numbers look like someone got a heck of a deal on one of the units and could probably very easily get the cost back if he were to buy the available parking space. Whereas another one of the units would probably not gain much if any value in his home by adding the parking space.
I think if we were to buy the spot for our unit we would add about $20k in value to the home, but it would still cost us at least 10k+ to add the parking, I would like to consider it a convenience cost. I still dream about snatching that parking space up in a second if I had the means, but my friend is right, she may not see any return on her investment if she were to buy a spot in her building and I may not see enough.