CRE N Illinois

Transwestern report: Driverless vehicles will disrupt every real estate sector

  
Transwestern report: Driverless vehicles will disrupt every real estate sec,ph01

Driverless vehicles are in our future and it’s important to understand how that might affect different real estate sectors. Massive mall parking lots could be repurposed into office or multifamily buildings, gas stations transformed into electric car charging stations and it could completely transform and fully automate industrial and supply chain, according to a new report released by Transwestern.

At least nine automakers are already working on engineering self-driving cars and several have secured partnerships with tech firms to develop the technology needed. Companies such as Uber, Google, BMW, GM, Ford and more are competing to introduce the first fully autonomous car. And when that happens everyday lives, roads and real estate will change forever.

Transwestern cites one study that says by 2030 private car ownership will drop by 80 percent and the cost of ride-sharing will be four to 10 times cheaper than owning a car. Those savings on transportation costs could result in a $1 trillion boost in annual disposable income for U.S. households. Fully autonomous vehicles could also reduce traffic congestion and accidents, currently 94 percent of which are due to human driver error. Cities could see fewer multi-lane streets, less street parking and signaled intersections which potentially could free up more than 30 percent of urban space. Municipalities will be faced with figuring out ways to repurpose busy city streets for additional retail, outdoor restaurants and public space.

Parking lots would be less important and public transit ridership might also decrease, according to Transwestern. Some architects and developers are anticipating this change by building parking garages that can easily be converted into other structures. Parking demand may even decrease by 70 to 90 percent which means urban planners and city councils will need to shift parking requirements for developers. Some have argued that widespread use of autonomous vehicles would help properties farther away from public transportation. For example, in Summit, New Jersey Uber subsidizes rides to and from the train station which also minimizes the need for downtown parking.

As for offices, the biggest impact would be on employees’ commute. Workers would be able to hop in a driverless vehicle and go. Instead of focusing on the road, you’d now be free to read the news, check email or even take a nap. This changes means building owners and property managers might have to rethink ways to utilize parking space. Parking revenue averages 10 percent of a CBD office building’s revenue so it’s important to reimagine this space. Features such as curbside pick up and ride-share lobbies could be in-demand as autonomous vehicles spread. Suburban office properties often already have drive-up access and lots of space which might mean an easier adjustment.

The industrial sector will see the most disruption particularly when it comes to warehouse operations, logistics and trucking, according to Transwestern. In 20 years the industrial sector will look nothing like it does now, Transwestern said. Thousands of warehouse and trucking jobs could be replaced by automation and supply chain will be tighter than ever. Automated machinery such as self-driving forklifts and automated racking systems are already being integrated into operations. This is one reason Amazon acquired Kiva Systems, a maker of robots used in fulfillment centers for $775 million in 2012. A fully automated warehouse means better productivity and increased space efficiency. Zenith Aviation regained 50 percent of its floor space by converting shelving systems to better suit automated inventory storage and retrieval systems. Overall, Zenith Aviation saw a 105 percent increase in the number of items it could stock within its warehouse.

Nearly 70 percent of goods delivered via long-haul commercial trucks and the introduction of driverless vehicles would be welcome in an industry that struggles to retain drivers, according to Transwestern. Current trucking methods require drivers to stop and rest after a certain amount of time or miles—driverless vehicles would eliminate this requirement. In this industry the fulfillment cycle is increasingly demanding which puts strain not only on trucks but across all distribution channels. If automated trucks are able to cover more distance in less time, that could mean moving facilities farther away opening up new possibilities for previously unattractive locations. It’s clear that the location and size of warehouse and distribution centers will need to be reevaluated.

The retail industry has become quite familiar with disruption and the introduction of autonomous vehicles would mean another shift in real estate strategy for retailers, according to Transwestern. In the future, large retail stores could become mini-distribution centers that rely on autonomous delivery robots to reach customers with same-day delivery options. Those massive mall parking lots might need to be respositioned as well. A mall in Springfield, Virginia has opted to redevelop a surface parking lot into a multifamily, office, hotel and additional retail project. There’s no doubt that automated vehicles will affect, and possibly eliminate the need for, car dealerships, gas stations and auto repair shops. Electric vehicles are forecasted to surpass gas-owned vehicles by 2040, so some gas stations could be repurposed into charging stations.

The adoption of automated vehicles could mean fewer injuries from car accidents which would affect healthcare facilities. Nearly 6.3 million auto-related accidents were reported in the U.S. in 2015, and 2.4 million people were injured with 35,092 injuries resulting in death. Owners of healthcare properties should consider the possibility that fewer patients from auto-related incidents as driverless cars become more popular.

Automated vehicles could prove to be the biggest disruptor for real estate since the invention of the car itself, Transwestern said. However, the change depends on how widespread and how quickly consumers and companies adopt the change. There are still large obstacles such as government regulation and gaining consumer trust, but the rise of automated vehicles is guaranteed to present challenges and opportunities for all real estate sectors.