Looking into the future — how autonomous vehicles will impact Real Estate
The future is happening a lot quicker than most people realize. Self-driving cars (autonomous vehicles or AVs) will be a reality in less than 5 years. From technology companies such as Google, Apple, and Intel to automobile manufacturers such as BMW, Ford, GM, Nissan, Toyota, and Tesla, everyone is scrambling to push autonomous vehicles to the market sooner rather than later.
Real estate is one of the world’s biggest industries. But very soon, AVs will change social and living patterns, while significantly influencing property markets in ways we haven’t even begun to understand.
Millennial consumers’ perspective on car ownership is already changing with rising services such as Uber and Lyft. Autonomous driving is the next step in this direction — where people will transition from owning cars, to using cars, to using autonomous mobility as a service.
Obviously life as we know will change. There will be a reduction of accidents, less traffic congestion, and overall increased access to mobile multi-tasking. These new driving patterns will inevitably transform our city planning, thereby impacting real estate in countless ways, two of which I’d like to focus on:
1) AVs will allow for better optimization of limited space
2) AVs will cause more people to move into the suburbs (and maybe rural areas)
AVs will allow for better optimization of limited space
In a June 2016 article, analysts at McKinsey & Company wrote, “AVs could change the mobility behavior of consumers, potentially reducing the need for parking space in the United States by more than 5.7 billion square meters. Multiple factors would contribute to the reduction in parking infrastructure.”
It will be interesting to predict what the future of large parking lots across cities will be. Researchers and experts say AVs will reduce the need for workers to find parking. The lack of demand for parking will open up ideas for developers and landlords to use current parking structures and facilities in creative ways — such as retail, commercial and healthcare.
In addition, the automization of AVs will allow for more cars to be parked in less space, which will undoubtedly change the way future buildings are designed.
AVs will cause more people to move into the suburbs (and maybe rural areas)
AVs will change homebuyers’ location preferences. Low density areas, such as suburbs will see the greatest impact. Right now, the biggest burden of living in the suburbs is living outside the city — commuting. Since there will be a significant reduction in travel-time costs related to doing other productive activities besides driving, consumers are likely to be more willing to commute. As populations in suburban areas will grow, real estate developers will have to adapt to the demographic climate.
We also have to keep in mind that a boom in residential real estate could also mean more opportunity for commercial real estate in the outskirts of the city. The city will remain the heart and the overarching hub, but AVs are sure to gentrify the suburbs tremendously.
While we don’t know how the transition will occur, AVs will change life as we know it. Our fantasies aided by cartoons such as ‘The Jetsons’ are soon going to become real.
We position our real estate investments as long-term assets. We position real estate value based on location, community-infrastructure and access. These strategies have been working for centuries; however, as soon as AVs start impacting transportation trends, we will need to re-think ‘long-term’. Change will be upon us very soon, and as real estate is often considered as relatively non-liquid assets, investors should take these future realities into consideration.
As the government, property developers, architects, and city planners begin recalibrating their perspectives on transportation and its effect on community organization, it will be interesting to see how visionary real estate investors develop strategies to evolve.