Industrial N Illinois

Driverless tech could expand industrial real estate ‘sweet spots’

Driverless tech could expand industrial real estate ‘sweet spots’,ph01

Most of us can't imagine a world without a car since our daily lives, and entire industries, are built around the vehicles. Think of insurance, logistics and even your neighborhood pizza boy—if cars and trucks aren't the business itself, they are a necessary part.

That's why driverless cars will be one of the most widespread, disruptive changes. The structure of our neighborhoods and cities are built around cars and trucks—roads, interstates, parking lots, garages. Some of the biggest deal killers in commercial real estate have to do with parking—warehouse facilities without adequate parking lots are less desirable, large multifamily buildings are restricted by parking requirements and it's also a vital component for most retail.

However, we're already shifting away from traditional vehicle use with TOD projects and Millennial's preferences for ride-sharing and biking. No one can predict how driverless tech will ultimately affect us, but it's clear that it will change consumer behavior, which is what really drives change in commercial real estate.

David Egan, Head of Industrial and Logistics Research at CBRE, told RE Journals that the technology currently available is good enough to put fully autonomous driverless vehicles on the road. The software essentially turns cars into computers that can talk to one another and adjust driving for traffic, weather or road conditions. Light detection, ranging systems and artificial intelligence are vital to navigation and avoiding accidents.

The problem with moving forward has to do entirely with regulation. There are important policy and legal concerns as well as different laws regarding licensing, standards, regulation and privacy from state to state.

According to a study from the Brookings Institute, in the past two years, 23 states have introduced 53 pieces of legislation that affect self-driving cars. The need for unity is imperative for the future of driverless. The software needs to be the same across all car brands and manufacturers and states need to have the same guidelines and laws for driverless vehicles—otherwise it gets murky.

The logistics industry is likely to see the changes of driverless tech first. Right now, trucking companies are extremely limited by 8-hour shift requirements—a driver can only get so far in that amount of time. Allowing drivers to turn on a driverless setting, even just a few hours, will open up that "sweet spot" range, Egan said.

"Driverless could mean trucking companies operating 24-hours a day, " Egan said. "In terms of real estate, it gives the opportunity for fringe markets to open up. Maybe some locations that were too far away are now within range and less dense than traditional markets. It expands the 1-day service radius.”

Trucking, third-party logistics, e-commerce and ride-share companies will likely be early adopters of this technology. Although we have the software for fully autonomous vehicles there is a lot of expensive technology required which means it will take a while before we see it in every industry. The initial cost is so high because it includes cameras, sensors, lasers, AI systems as well as highly complex software. Although it will be costly for businesses to make this switch, Egan doesn't see this as a permanent barrier for smaller companies.

"Tech works in one direction. It gets better and cheaper overtime. There might be an interim period where driverless tech is expensive and doesn't match well with a small budget. But it won't take that long for the price to reach a reasonable range," Egan said.

When the technology begins to filter into the market, in about 9 or 10 years some experts say, it will ultimately bring a lot of positive change. There are lots of questions around driverless cars and how it might affect the driver workforce. The government and regulating industries face economic and social challenges that they'll need to figure out before driverless cars and trucks hit the road.

"Everyone is thinking about driverless—how do we deal with this and what can we do with it," Egan said.