Commercial Real Estate Loans and the Parking Ratio

If you wish to place a commercial real estate loan with a life insurance company, one of the financial ratios that should be disclosed on the Executive Loan Summary is the parking ratio.  The parking ratio is the ratio of parking spaces per 1,000 square feet of gross leasable area (GLA).  The intent of this ratio is to provide a uniform method of expressing the amount of parking that is required or available at a given building.

Reasonable parking ratios depend on the type of property and the location.  A life insurance company or other commercial real estate lender may require that a suburban office building have a parking ratio of at least 3.5 to 4 spaces per 1,000 sf of gross leasable area.  However, in highly-populated central business districts (CBD's) like New York City, a parking ratio of 1.5 or 2 might be considered adequate or even plentiful.

City planning departments usually have minimum acceptable parking ratios.  Older buildings may have been grandfathered in (allowed to keep operating despite the fact that they do not meet current building codes because they were built in your "grandfather's" time), but they are considered to be legal, non-conforming buildings.  This means that the building does not have to be torn down just because it does not meet today's building and zoning ordinances, but if the building were to burn down, it could not legally be rebuilt.

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