How Will Autonomous Vehicles Change CRE Development?
- Dec 05, 2018
New York City is one of the metros facing a shortage of parking spaces due to the constant population growth coupled with thousands of people visiting the city every day. The local government is looking at technology, especially mobility projects such as driverless cars, to address the issue. At the same time, authorities are working on new policies that are more consistent with broader sustainability, transportation and land use goals.
Experts believe that autonomous vehicles (AV) will greatly change the way the real estate market functions. But how exactly will the industry be impacted? Camber Creek General Partner Jeff Berman provides insight on how driverless cars are expected to influence commercial real estate in general and in NYC.
How will advances in the auto industry and mobility impact real estate?
Berman: Advances in mobility will force a rethinking of the infrastructure of our urban and suburban centers. All facets of real estate development will be impacted. For instance, form factors for street layouts could very well change taking into account that AVs will move with better technical precision than human driven vehicles.
Housing of both the single-family and multifamily variety will be impacted as well—again, primarily by logistical/spacial layout considerations. Will houses need garages? Driveways? If so, of what variety? In the retail sector, shopping centers/malls have been traditionally oriented around their parking fields. Will this still be a factor in development? How about municipal garages? Will they be relocated (for mass AV storage/charging) and make way for massive urban redevelopment?
How are NYC developers preparing for the use of driverless cars?
Berman: I think developers in NYC and other major urban centers are in the same boat as urban planners. That is, trying to qualify the impact that driverless cars will have on cities and beyond. Significant changes to come include the reduced need for proximate parking and the present configuration of streets and roads. Additionally, developers are starting to think about more remote areas of the five boroughs as attractive development sites. AV will make transit-oriented development—where development is clustered around transportation nodes like subways and trains—less necessary as AV powered commuting becomes routine.
A recent report shows that the total surface of parking lots in NYC equates to double the size of Central Park. How will driverless cars impact existing parking spaces?
Berman: The most obvious impact will come from the amount of space that will be available for adaptive reuse as the need for parking lots in the city dissipates. Provided the macroeconomic climate is healthy, density in the city should increase as many parking garages get repurposed for commercial and residential use.
How will development costs change if autonomous vehicles become part of everyday life?
Berman: I recently read a report that discussed the effects that AV will have on the construction industry. “Smart” construction equipment—backhoes, tillers, rollers etc.—has the potential to be disruptive in a number of ways, including making construction faster and more precise as well as changing labor patterns around a development site. Taken as a whole, I imagine that the value that developers will be able to extract on a per foot basis should increase as a result of the efficiencies that AV will create.
Parking revenues average approximately 10 percent of a central business district office building’s gross revenue. How will businesses cope with the profit loss?
Berman: Certainly a valid concern for building owners with onsite parking facilities. But let’s look at it another way. What is the revenue potential of the recaptured parking space? Could it be up-utilized in a way that creates significantly more value for/to the building?
What are the downsides of this transition?
Berman: I think the net benefit of AV—more efficient use of space/better urban planning/lower risk of auto fatalities etc.—will far surpass the downside. But I suppose an inevitable sticking point will be the near-term pain that will arise from the job displacement sure to accompany mass adoption of AV—taxi, truck, bus etc. drivers come to mind. However, as one job category fades into obsolescence, new job opportunities will be created as more than making up for near-term upheaval.
How open are developers to implementing tech in their projects?
Berman: If you would have asked me that two or three years ago, my answer would have been “not very,” because the industry has traditionally been reticent to change. But in the last 18 months, stakeholders in the industry have woken up to the fact that they can create and drive efficiencies with technology. The conversation around tech is transitioning from “tech is a nice-to-have” to “tech is a need-to-have.”
Image courtesy of Camber Creek