As anyone who has had to park downtown can attest, parking rates in many cities often seem egregiously high and few alternatives exist to save on parking. This has likely prompted the question as to what factors are influencing the prices for these spaces. A recent survey from Colliers International has uncovered the cities with the highest monthly parking rates in America. Listed here are some ideas as to why such spaces are so highly sought after that they can fetch up to $1 million.

Coming off a 1.5% decrease in the unemployment rate between July 2011 and July 2012, and with a higher average wage than the rest of the country, Chicago's parking price woes are a product of its own success. The improvement in the local economy has created modest inflation which is reflected in the monthly parking rates.

With some of the cheapest parking, much of it free, Seattle seems an odd choice to be on this list. Unfortunately, this policy of underpricing has created artificially high demand. More people desire to park than might otherwise do so. The result is few, if any, spaces being available and regular commuters must purchase more expensive monthly passes in order to be assured they get a parking space.

The price paid for a monthly pass should reflect the demand for parking spots and the supply available. This allows the market to allocate and price spots efficiently. The parking rates in Philadelphia, however, are set by the city as a form of revenue collection. This creates market failure where the true number of needed parking stalls cannot be reasonably ascertained or priced appropriately. The result is too few parking spaces and higher prices for the ones available.

San Francisco
It's a small comfort perhaps, but expensive parking in San Francisco can be attributed to an improvement in the economy. Due to its technology and energy firms, San Francisco has benefited from the recent drop in U.S. office vacancies. As demand for its office space has increased, the number of commuters to the city has increased. This has led to a commensurate increase in demand for more parking and, of course, higher rates.

Currently experiencing a boom in housing construction, Boston's economic outlook is increasingly optimistic. This is putting the squeeze on existing parking infrastructure as more people flock to the city. Further, an increase in transit fares may shift more commuters toward their cars. Boston being on this list, however, is likely a result of a cap, in place since 1976, on the number of parking spaces. This artificially limits the supply, and it is the surest way to increase prices.

New York City
That New York has the most expensive parking in America is no surprise. It has the largest metropolitan population and one of the highest population densities in all the United States. In addition, more than 3 million people there commute. Even with slightly over half using public transit, there are still approximately 1.5 million people scrambling for a parking spot every day. This problem is compounded by the fact that a majority of commuters choose not to carpool. The Midtown area is the city's largest business district and has some of the most sought after real estate in the country. In realty, there is a concept known as "highest and best use." Basically, the land for parking spaces could be used much more effectively, but consumers demand and expect parking to be provided. A price premium needs to be charged in order to offset the losses from not using the land for more productive purposes, such as offices or apartments.

The Bottom Line
It costs a lot to park in these cities. Sometimes it's because of artificially-inflated prices, and other times it's because there is really a shortage of parking spaces. Either way, there may be no choice but to pay the prices.

Related Articles
  1. Stock Analysis

    How Expensive Is Whole Foods, Really?

    Learn about Whole Foods Market, Inc., and discover how Whole Foods pricing actually compares to that of other grocery store operations.
  2. Stock Analysis

    4 Quick Service Restaurants for Your Portfolio

    Learn about the four quick service restaurants with attractive investment theses and growth prospects that can be valuable additions to your portfolio.
  3. Stock Analysis

    What Makes the 'Share a Coke' Campaign So Successful?

    Understand how Coca-Cola implemented the successful "Share a Coke" campaign. Learn about the top three reasons why the campaign was successful.
  4. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  5. Budgeting

    The Hard Way We Pay For Convenience

    Convenience is a luxury. However, any cost-conscious individual should be aware of these ridiculous ways we pay for convenience and how to avoid them.
  6. Stock Analysis

    The 6 Best Dividend Stocks in the Consumer Staples Sector

    Learn about the top six companies that make an attractive investment for investors looking for stocks for dividend income investing.
  7. Mutual Funds & ETFs

    Top 3 Consumer Cyclical Mutual Funds

    Obtain information on, and analysis of, some of the best performing mutual funds that offer exposure to the consumer cyclicals sector.
  8. Personal Finance

    Choosing An In-Home Safe: Features To Look For

    What to look for in a box to protect your irreplaceable belongings.
  9. Retirement

    This Is How You Could Live in Costa Rica for $1,000 a Month

    Explore the cost of living in Costa Rica, and learn how you could sustain a nice middle-class lifestyle for yourself on about $1,000 a month.
  10. Investing

    Procter & Gamble Restructures, Sheds 100 Brands

    All businesses face adversity, and Procter & Gamble is no exception. We take a look at recent developments affecting this global giant.
  1. Can your car insurance company check your driving record?

    While your auto insurance company cannot pull your full motor vehicle report, or MVR, it does pull a record summary that ... Read Full Answer >>
  2. Are Social Security benefits adjusted for inflation?

    Social Security benefits are adjusted for inflation. This adjustment is known as the cost of living adjustment (COLA). For ... Read Full Answer >>
  3. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  4. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!