It’s clear that driverless car technologies have the power to reshape our society. A new study sponsored by Intel and prepared by Strategy Analytics predicts driverless car technology could generate $800 billion in economic impact by 2035 — and $7 trillion by 2050.
While many are focusing on how driverless cars could reduce commute times or make the roads a safer place, how the built environment adapts to this emerging reality may be what ultimately determines its success.
The commercial real estate industry has long wrestled with the realities of a workforce that spends an increasing number of hours in cars, moving along the highway at a frustratingly slow pace. In cities from Los Angeles to Berlin, developers are digging deeper into the ground or building higher in the sky to create more parking.
But the resurgence of some of the world’s most historic downtowns and the rise of urban living is changing the landscape. In fact, nearly 63% of the U.S. population is now living in cities, according to the U.S. Census Bureau.
TRANSPORTATION TECHNOLOGY AS CATALYST
Autonomous driving technology doesn’t mark the first time that advances in transportation will impact society. Around the world, many major civilizations developed first on coasts because ships were the primary method of transportation for people and commerce. Urban sprawl was only made possible by the proliferation of cars, which gave workers the opportunity to live further away from the urban workplace. This led to growth in infrastructure development such as roads, highways and gas stations.
A recent policy brief from the Institute of Transportation Studies at University of California, Davis outlines how the convergence of three technologies — automation, shared mobility and electrification — could transform transportation. Related directly to commercial property, the brief discusses how land-use planning and policy will be crucial to prevent further sprawl.
A WALKABLE LIFE
Among the most natural shifts we may see from driverless cars is even more pedestrian-friendly downtowns.
Imagine the multi-lane streets that run through your downtown. Now imagine that road space cut in half, if not more so, and backfilled with anything from retail and eateries to greenspace. Now, imagine all of the parking structures sandwiched between the office towers that make up your skyline. What if the majority of those structures were repurposed to provide additional living space?
The potential impacts of the adoption of driverless cars are nearly endless and are likely to influence every sector of commercial real estate, in addition to industries such as insurance, car manufacturing and more.
NO SECTOR LEFT UNTOUCHED
Some impacts to the commercial real estate industry are more obvious, such as multifamily and office developers no longer being required to construct parking for thousands of residents or tenants. Further than that, developments that were put on hold or outright abandoned due to an inability to construct underground parking will again be viable. This opens up an unimaginable amount of potential new development sites.
For shipping and logistics, driverless trucks and drones will likely make consumer goods easier and faster to deliver. Colliers research shows that for the first time, online retail is forecast to account for more than $1 out of every $10 spent in 2017. And with industrial vacancy at record lows, being able to develop more manufacturing and distribution property with less space dedicated to parking requirements could help meet demand.
For forward-thinking investors and developers, the potential is even greater. As the need for parking lots wanes, this typically prime, centrally located real estate could be repurposed to accommodate the growing need for affordable housing and urban greenspace. This would make the urban core an even more attractive place to live for those families that have historically fled to the suburbs in search of open space.
The ease of travel could also have a big impact on our efficiency. Workers in cities that lack the robust public transportation of New York, Paris or Tokyo could turn unproductive driving time into a useful part of the workday, conducted from the Wi-Fi-enabled backseat.
GREAT (BUT REALISTIC) EXPECTATIONS
As exciting as these possibilities may be, patience and a forward-thinking mentality are crucial. Perceptive investors should already be considering the value of real estate primed for adaptive reuse in an age of autonomous vehicles, such as parking lots and gas stations. However, it may be some time before a return on those investments is realized.
Research from the Victoria Transport Policy Institute predicts that “independent mobility” for affluent non-drivers might begin in the 2020s or 2030s. But it could take until the 2040s or 2060s for the technology to become affordable and widely adopted.
Regardless of how much this technology will truly change our way of life, it will be incumbent upon the commercial real estate industry to anticipate — not just react to — this potential reality and be stewards for reshaping our megacities and suburban communities.
Now is the time to prepare for this societal transformation. While hurdles such as continued technological development, lab testing, piloting and governmental regulations still exist, the built environment must begin to adjust in anticipation. Of course, questions remain. How widespread will adoption be? How quickly can commercial real estate react? These are the questions that will determine the way driverless cars shape commercial real estate — and our day-to-day lives.
Dylan Taylor is President & COO of Colliers International. He leads more than 15,000 skilled professionals in 68 countries. In 2011, Dylan was named one of the top Young Global Leaders in the World by World Economic Forum. Connect with Dylan on LinkedIn.