This blog post draws on research Aquicore conducted for its 2017 whitepaper CRE Tech Horizons: Infrastructure.
Among the technical marvels that are appearing on the horizon right now, perhaps none has been discussed and written about as breathlessly as the self-driving car. There is a little more room for skepticism than some of the technology’s most ardent supporters want to admit, but fundamentally, this makes sense. Autonomous vehicles could effect a massive change in the way we live, work, and play.
Whether self-driving cars make it into common use next year or ten years from now, they’re coming. When they arrive, their effects on human behavior will undoubtedly spill over into other areas, notably commercial real estate. Modern city planning revolves tightly around transportation. Just like the first cars profoundly altered cityscapes early last century, experts are predicting that self-driving cars will this century.
One of the most important shifts for commercial real estate will be to parking. Right now, most downtown commercial and residential real estate needs access to nearby parking. This means a lot of wasted square feet downtown that developers could otherwise use to construct or expand useful spaces. Parking lots and garages could become housing and retail, and we could reclaim on-street parking for more walkable, attractive cities.
Self-driving cars don’t need to park nearby to their passengers’ destinations. Many experts predict that society will shift away from a car ownership model and toward a ride-sharing model a la Uber or Lyft. After dropping off one passenger, they will simply continue on to the next.
“If these self-driving cars were shared like Uber or Lyft and you would just be summoning them from wherever you are to come and shuttle you wherever,” said Michael Gaynor, a writer for The Washingtonian who spoke to experts in autonomous vehicles and CRE about the potential for impact on the industry. “That would theoretically decrease parking requirements a ton, so suddenly you don’t have to have on street parking anymore.”
Even if this doesn’t happen and people continue to own their cars, autonomous vehicles won’t need to park downtown. They may drop their owners off and travel to parking lots on the outskirts to await their signal. Alternatively, owners might opt to send their vehicles out as cabs for extra cash when they aren’t using them.
The parking lots that do exist will need to be re-thought as well. No one will be entering or exiting the parked cars, so it will be possible to squeeze them closer together. A ride-sharing fleet, for which retrieving specific cars is irrelevant, may be able to squeeze them still closer together. What they will need is access to power. Most experts hope that the majority of cars will be electric by the time autonomous vehicles are an everyday reality. (If not, the increase in driven hours could be a serious problem.) Assuming this is the case, new parking lots have to cater to their charging needs.
Experts are anticipating another important change to the curb space in front of major buildings. Anyone with school-age children will sympathize with the need for an intelligent solution to the pick-up and drop-off problem. Long, slow-moving lines quickly form when a large number of people need to be on- or offloaded in the same place.
Leaders in commercial real estate are already experimenting with designs to alleviate this problem. Most designs do two things: They allow cars to pass through the space rather than turn around and they maximize the surface area that is useable for getting into and out of cars. Designers are hoping to impose an intuitive order onto a process that could otherwise be frustratingly chaotic.
No design has emerged as the obvious choice for commercial buildings yet, but real estate owners have time to experiment. Gaynor stressed the fact that the total fleet of cars takes about two decades to turn over. This means that self-driving cars and regular ones will share the road for quite some time. Designers will get a chance to see what works and what doesn’t before lines of cars stretch around the block.
There are two schools of thought as to whether self-driving cars will result in more geographically concentrated or diffuse American cities. On the one hand, reduced demand for in-city parking and easy access to affordable transportation could make living in cities even more desirable.
“For urban centers, you have this kind of utopian vision of self-driving cars quietly humming along the streets,” Gaynor told Aquicore. “Parking lots would be obsolete, so you could put parks and green space or affordable housing into those spaces. Likewise, there’s a ton of spaces that are just considered dead space when it becomes a parking lot. I’m thinking about parking garages in buildings: That opens up a whole new floor of space for an apartment building, especially in a place like DC where you have the Height Act.”
The alternative prediction is that easier, more pleasurable commutes will let people move further out of the city, exacerbating urban sprawl. Cities are concentrated centers of high-paying jobs and entertainment, which motivates people to pay a premium to live in and around them. The penalty that people pay for the lower property values further away from a city is a longer commute. One of the major draws of autonomous vehicles is that commuting time becomes free time. If people no longer have to pay the commuting penalty, they may choose to live further and further away.
That said, if self-driving cars end up running on clean electricity, a little urban sprawl might not be so bad. Diffusion could lead to opportunities for innovation on new environments for people to live and play in. People are probably more willing to commute for work than for an afternoon coffee or an evening drink, so small, walkable suburban neighborhoods might propagate. In a scenario that favors ride-sharing and sprawl, demand would exist for distributed fleets. No one wants to wait for a car to drive in from the city to pick them up. These miniature fleets would need their own parking/charging lots to support them.
Estimates vary wildly as to when self-driving cars will become a reality for most people. Elon Musk, CEO of Tesla and real-life Tony Stark, claims that fully autonomous, wheel-optional vehicles are just two years away. Gilbert Gagnaire, co-founder of the autonomous shuttle company EasyMile thinks that we’ll never get there in some markets. Either way, this technology is coming in some form, and when it does, it will have an important impact on CRE. The companies and professionals in the industry that are preparing now will have an important competitive advantage.
Interested in learning more? CRE Tech Horizons: Infrastructure dives even deeper into self-driving cars, examines the impact of drone delivery on retail, and considers how the blockchain will affect commercial real estate operations and transactions.