A successful Central Business District (CBD) combines large amounts of labor and capital on a small amount of land. CBDs thrive on high density because the prime advantage they offer over other parts of a metropolitan area is proximity-the immediate availability of a wide variety of activities. The clustering of museums, theaters, restaurants, and offices is the commodity a downtown can offer that other areas cannot. Yet downtowns have long been plagued by questions about access, for they can either thrive on or be destroyed by congestion. In order to thrive, a CBD must receive a critical mass of people every day but do so without clogging itself to the point of paralysis. One way to do this is to require off-street parking spaces. Off-street parking can reduce the cruising for parking that often strangles the streets of CBDs, but parking requirements have high costs.

It's not hard to see how a conventional parking lot can undermine a CBD's success; a downtown surface lot often has a very high and very visible opportunity cost. Instead of a building teeming with activity there is an expanse of asphalt with one employee manning a booth; where there could be something there is instead not much. But even when off-street parking is dressed up or hidden-when it is placed underground, or in a structure that has retail uses at the street level-it is inimical to density. Because land is most expensive in the CBD, off-street parking is also most expensive there, and constructing it uses up capital that could otherwise be invested more productively. More important, if off-street parking is required, as it is in many cities, then it becomes rational for firms to locate in places where land is less expensive, meaning it becomes rational to locate outside the CBD. A parking requirement applied uniformly across a city implicitly discriminates against development in the CBD, because the burden of complying with the requirement is greater in the CBD than almost anywhere else.

Further Reading:

People, Parking and Cities