Neil Finn wrote these words in 1981 on that great album Waiata, which I have recently rediscovered. Aptly the B side was “Holy Smoke”.
So, what has this got to do with ParkScience and the weird and wonderful world of parking you ask. It had me thinking about my early days in parking, moving to Sydney in the heady days of 1988 before FBT, Parking Levies and mobile phones. The parking market was exceedingly robust and the challenge (it seemed) was to get hold of as many leased sites as possible on the longest terms as possible, then turn up the dial.
My first task was to look at the history of (like for like) parking rates over the previous ten years in Sydney. I found they had grown at an AVERAGE of 13% year on year over the ten years! No hiccups, just a nice line reaching skywards on the graph. As rents had been increasing by around four percent – or by some exotic formula Laurie Wilson devised based on parts of a rate structure that was very clever if you knew how it really worked – the industry was making very good profits.
This reinforced the very aggressive bidding that Wilson (and to a lesser extent Kings and Secure) had commenced, with the now infamous Wynyard Carpark having been won six months before I moved over from the wild West.
We had seen a decade of 13% compounding revenue growth – why would it stop? The whole market was engaged in a bidding war. If revenues are growing by 13% - you can easily afford rent increases of 5% - and eventually landlords were demanding 7% rent growth on 10-year fixed term agreements, with further ten year options.
For those born before 1970 and learned math longhand will know the “Rule of Seventy Two”.You divide seventy two by the compounding increase to arrive at the number of years it will take to double. At 7% compounding, the rent will double by year ten. So, a $2,000,000 rent becomes $4,000,000.
Prior to the untimely end, Wilson had four substantial offers in the market where the business case was to lose over $1,000,000 each in their first year of operation. Wynyard was already losing over $1,000,000 by 1989.
So, what went wrong? Was it a “Black Swan” event – or a “Perfect Storm”?
One of the most interesting carparks we have worked on recently is the redevelopment of the existing Warrick Lane open air carpark into a mixed use commercial and public open space transformational project with Blacktown Council taking on the role as Master Developer.
