Wednesday, April 2, 2014

Parking as a ‘Commodity’? Hmmm...



Is parking a commodity?  If it is then we could manage it better, value it more and it could play a major role in revitalising a city.

The definition of a commodity is a marketable item produced to satisfy wants or needs.  The definition from Wikipedia is a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market. Or in plain terms, a commodity is not a high value product, it is common, in plentiful supply and almost always anyone can provide it. Parking is possibly seen as a commodity.

As in the case of some commodities, the price of parking is also derived from the function of the market, that is, supply and demand in the parking market tends to set the price for parking as one parking operator competes against another parking operator.  In a lot of cities, this rule only applies to some classes of parking, such as off-street parking.  Parking on-street is not competitive in most places and therefore this class of parking is mis-priced and mis-managed.  Parking is seen as a plain, simple, valued but not a valuable product.

So is parking a commodity?  Mostly yes but only in a functioning market place.  In the real world, in some cities, the market is not functioning well and so some cities have too much or too little parking as a result.  It is common, its value is not that high, it is mostly in plentiful supply and there are little or no restrictions to the provision of parking (you need land in the same way you need a factory or farm in the production of other commodities).  In this form, parking is a commodity.  To get the full benefits of a commodity though, that is the right value at the time you purchase or use it, there must be a functioning market and this is where most cities let its constituents down.

The problem is that the major suppliers of parking in a modern world view parking though old glasses.  In city decision making, parking is seen as a capital asset and not as a commodity.  This devalues parking and draws valuable resources to support the wrong activities.  Some cities spend time on major ‘parking plans’ that are all about dealing with parking buildings and assets, but have little interest or knowledge on how to make those assets then work efficiently.  In other words, over simplistically, it is acceptable for those assets to be poorly managed as long as they are in the right place.  For example, a car park is built at a cost of $30m, but its impact on the surrounding retail area will have a positive affect of $160m over its life time, that’s not counting its own revenue or inflation.  Yet the energy expended on getting the building in the right place, how it fits in with other parking resources and how it links into a transport network, is disproportionate to the economic benefits created by the parking operation.  Parking is about car park buildings as much as I-Pods are about the Chinese factory ‘building’ they are made in.  It’s important but not that important.

So what is the benefit of defining parking as a commodity?  It’s not a pork belly or orange juice traded out of the Chicago Mercantile Exchange.  It is the moment in time, that people consume, not the piece of turf the car sits on.  When a customer buys parking, they don’t get a piece of tarmac, they get a start time and a finish time. They get the ‘b’ in the ‘a to b’ relationship.  When viewed properly as a commodity, it is a marketable and competed for resource to the benefit of the consumer and supplier. It gets the right ‘value’ attached to it.  Notice here I didn’t say price, but value.  Cities have a history of mis-valuing parking and therefore distorting the market, setting incorrect prices and subsequently creating the wrong supply or demand volume, that is too much parking or too little parking.  Cities have caused the wrong supply of parking because of the mismanagement of the value of parking.  Parking should be marketed as a commodity and allow the market to solve the issues of supply and demand, for the benefit of all.  The market will allow to be built just the right amount of car parks required.

Let’s look at other marketable and competed for resources like a seat on a plane.  A seat on a plane is priced exactly to match its value.  The internet provides many ways to market this commodity these days in fact this is one of the most competitive markets in the world.  You can be on a plane and all of the people surrounding you will have paid totally different prices to be in that seat with you, just so the plane can be filled.  Price is a product of when you purchased the ticket or what time of the day the flight is at.  It has the right value.  The benefit of seeing parking in the same light as the airline industry is that they understand how to utilise the resource.  They have to draw the maximum opportunity out of it to benefit the consumer and the owner.  Having a functioning ‘market’ where parking is competitive and variably priced, ensures just the right amount of parking will be provided, with the right value attached, for the benefit of all.

A market functions well when the supply and demand of the commodity are in relative balance.  If it is out of balance, the market sends signals to the price that the commodity is now more valuable or less valuable.  The affect of this is that the suppliers or consumers then respond by buying or selling or not buying or not selling the commodity, and therefore rebalancing the value.  Most cities don’t allow the market to operate by interfering with supply as this is the only component they can affect, as they can’t affect demand.  So parking is then deliberately mis-valued and mis-priced to drive the outcomes they want.  The result is inevitably traffic jams or streets of vacant car parks, where the ‘goldilocks’ car park is required, that is just the right amount of cars for just the right amount of car parks.

Most cities would love to reduce their reliance on parking and mode-shift to other transport methods such as cycling or public transport.  The method they use is Travel Demand Management.  This is just another tool to interfere in the market.  Colloquially, if the public transport system is set up well with greater worth placed on people’s time in buses than in their cars, and the road corridors are set up to allow for greater worth for peoples time on those corridors than a private vehicle, then far less parking would be needed, other than for community access functions.  Sadly, this is not the case.  Most cities will try to regulate the heck out of the routes, the medium and the destination and force us into a poorly functioning parking provision with artificial prices and over or under supply.

In conclusion, commodities require a market to give them the correct ‘value’ at the time of the sale.  The value of the commodity usually relates to its price.  Many cities interfere in the market and this distortion creates an over or under price and supply. The consequences of that interference is a much longer battle to get mode shifts to other transport choices and a slower revitalisation of the city through increased traffic jams or streets of vacant car parks, neither are good outcomes.  Parking is a commodity that needs a full blown market to benefit us all.



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