TO BUILD OR NOT TO BUILD?

In 2020, a buyer acquired a parcel of land featuring a three-story commercial building. The structure occupied the right half of the lot, while the left half remained vacant. At the time of purchase, the building had no tenants.

The buyer considered two options:

A. Expanding the building to maximize the property's potential gross income (doubling it). This expansion would result in eight commercial units with nine parking slots.

B. Keeping the vacant space as a parking lot, providing 17 parking slots for five commercial units.

Knowing what you know about the market now, which option would you recommend? The answer will be posted on Friday.

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Revisiting last Wednesday’s post…

Before anything else, let me emphasize—there are no right or wrong answers, only consequences. What follows is my take on the matter.

The question: Should the new owner of a commercial property construct a new building or maintain the lot as a parking space?

My perspective: Keep it as a parking lot.

Why? Because a dedicated parking space provides a strong competitive edge. As Michael Porter—the strategist behind the "Five Forces" framework—explains, businesses can only compete in two ways: cost leadership or differentiation.

The problem with evaluating the property based purely on "Potential Gross Income" (PGI) is that it assumes all units will be fully leased. A quick drive around the area would tell a different story—numerous commercial properties are up for sale, many lacking designated parking. Even those that offer parking often operate on a first-come, first-served basis. An open, accessible parking lot is a valuable asset, allowing vehicles to move in and out with ease. Further proof? Nearby residents even inquired about renting parking spaces—clear evidence of high demand.

Who Benefits from Large, Flat Parking Lots?

+ Retail Establishments (Restaurants, Convenience Stores, etc.)

+ Logistics Companies (motorcycles & trucks)

Shortly after the property was refurbished, a single company leased the entire space, with two more firms on standby. This company willingly paid a premium rental rate—even without expanding the building.

Key Takeaway:

Know your market. You don’t even need to drive around to recognize parking scarcity (though it helps). Other indicators include the exponential growth of vehicles in Metro Manila or even viral videos of people fighting over parking spaces.