The buzz lately has been all about driverless cars and what our transportation future may look like. The reality is that these new vehicles will likely drive massive disruption, potentially forcing real estate investors and developers to re-examine their strategies.
As an example, according to the Old Urbanist blog, the Houston central business district is comprised of 65% streets and surface parking with only 35% for buildings and parks.
Even in a city with a significant mass transit system, such as Washington, DC, streets and parking take up close to 45% of the downtown central business district. Not surprisingly, cars can occupy substantial space within buildings – upwards of 30%.
It is hoped that driverless vehicles will reduce the need for car-related space, relieve congestion, reduce fuel use, and lower the number of accidents. The likely advent of these vehicles means real estate owners and investors should start paying attention now.
The big question is how will driverless cars effect real estate usage and values?
The Need for Parking Spaces Will Drop
The big unknown right now is whether the need for parking will drop, increase or stay the same. I think it is entirely too early to make an accurate prediction.
One of things experts agree on is that vehicle miles traveled (VMT) will increase dramatically with self-driving cars. The United States Department of Transportation estimates over the next 35 years, a 65% increase in VMT.
If private vehicle ownership dramatically declines, then decreasing the need for all types of parking will clearly decline. That means that values of parking garages and all parking lots will plummet. It also appears that some above ground parking garage structures will be repurposed but many will also become obsolete.
If indeed private vehicle ownership will decline, then the need for parking along roads will decline, making many more neighborhood streets twice as wide then needed.
Parking components for high-rise apartment buildings that comprise as much as 15% of construction costs, will likely become unnecessary, or at least reduced. This reduction in cost will increase developer returns or allow reducing rental costs by possibly as much as 30%.
Here is a warning from some groups in the real estate industry – any developer, who builds parking today, could be at a huge disadvantage when the demand for parking diminishes.
Bike Lanes and Urban Green Space
Parking lanes on streets could be converted to bicycle and scooter lanes, reducing dangers from incompatible uses. Some streets could be re-used into green spaces, decreasing water runoff and heat buildup. San Francisco already has programs that allow residents to repurpose street parking into mini public spaces or very small parks and patios, called “parklets.” This also creates an opportunity to create additional on-street spaces for nearby restaurants. Converting a fraction of San Francisco’s 280,000 parking spaces (which represents 40 million sq ft) could result in significant changes in the constrained residential and retail markets in San Francisco.
The Need for Data Centers
Even without driverless cars, the need for data centers is increasing daily. As hundreds of millions of vehicles transition into sophisticated mobile computer driven telecommunication devices (a computer server on wheels), the already extraordinary demand for data center space will grow. There will be, potentially, an increasing need for office space for high-tech and creative professionals who create the software and designs for the new vehicles.
Prime Real Estate
Autonomous cars operating as fleets and maintained and refueled at central locations will make the new corner gas station and convenience store obsolete. It is expected in the future that privately owned autonomous cars will be programmed to refuel on their own. It has been noted that, as of 2012, United States had over 125,000 gas stations and convenience stores, which will be suitable for redevelopment.
The current Transportation Secretary, Anthony Fox, has said fully autonomous cars will be available to consumers within the next ten years and will dominate the roadways in the years to follow. There is no question that vast economic and cultural change will arrive with the driverless car and real estate will be impacted in a variety of ways. Now is the time to prepare.