The first part of our two part series on the impact of self-driving cars on real estate addressed a variety of changes we should expect as this trend takes hold, including less need for parking, increased bike lanes, and a greater number of data centers as technology creeps more and more into our lives.
But the impact of driverless cars doesn’t stop there.
Transit Oriented Developments (TODs)
Another aspect of the real estate industry that will feel the effects are TODs. There are some in the real estate space who believe that, under today’s paradigm, values of real estate increase with the proximity to transit centers and metro stations. A recent CBRE study determined that office towers adjacent to subway stations in Manhattan receive up to a 19% rent premium over buildings only two blocks away. Some in the real estate industry believe that these types of premiums could ultimately diminish and some transit station properties may even lose their relative value edge entirely.
The CBRE findings beg the question, “could the counter-point – TOD property increase?” It is extremely difficult to forecast the changes in real estate. The desirability of living close to mass transit may increase as more abandon their cars and depend on the availability of driverless cars (and still have the convenience and dependability of subways, light rail, or buses). We see this happening today with millennials in cities and urbanized areas. In Washington, D.C., for example, apartment developers are providing parking for new facilities at only a parking rate of .33 spaces per unit. In Baltimore, the demand for parking has already lessened to about one space per unit. When asked why, major developers have indicated that urban mobility companies, such as Uber and Lyft, have created a market that results in millennials not wanting or needing either a first or a second car.
Suburban and Rural Residential Property
One of the items that has not been talked about much is the issue of making long distance commutes from the suburbs more feasible because of faster and more efficient drive times, allowing riders to do other things – such as work or sleep – while the driverless car is taking them to their final destination. Another time and money-saving benefit: GPS-based software systems in a driverless vehicle find the fastest routes and eliminate accident tie-ups.
It is possible that tomorrow’s 100-mile commute – with cars traveling a mere inches apart – could take as long as today’s 25-mile trip with far less stress and greater productivity. In the past, as transportation became cheaper and more convenient, people moved further away from their places of work. If that phenomenon holds true following the introduction of driverless cars, urban centers could suffer population reductions as the exurban areas/suburban areas rebound.
Driverless cars are coming and they will be here faster than we can imagine. 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 is in its path and will be clearly impacted in many, many ways.
Smart investors, smart developers, transportation engineers, will begin analyzing their portfolios and setting goals, for the future immediately.