Real estate and autonomous vehicles (AV) may not be the most intuitive pairing, but the impact of the development of each is more intertwined than one may think. With the rise of AV and ride-sharing, much of what we are familiar with when it comes to real estate pricing structures and value could change drastically. According to a report by CBRE Group, “Autonomous vehicles may have the greatest impact on the U.S. real estate markets since the mass adoption of the car and expansion of the federal highway system in the 1950s.”
“Autonomous vehicles may have the greatest impact on the U.S. real estate markets since the mass adoption of the car and expansion of the federal highway system in the 1950s.”
Over the past decade, the idea of autonomous vehicles has become far less of a fantasy, with major automakers (e.g., BMW, General Motors, etc.) and major technology companies (e.g., Google, Apple, etc.) alike racing to take their bite out of the pie.
As of April 2019, Uber had spent over $1 billion on autonomous vehicle technology. GM’s Cruise wasn’t far behind, spending $728 million and expecting to reach $1 billion in 2019. A report by Brookings Institution found that between August 2014 and June 2017, nearly $80 billion was invested in autonomous vehicles by automakers and venture capitalists.
Autonomous vehicles are on the rise and it’s only a matter of time before they become the standard. But how is this related to real estate?
Real estate has long been defined by the trope “location, location, location.” This essentially means that the value of a property is typically determined by its proximity to downtown areas, public transportation, commercial centers, institutions such as universities, known talent pools, and so on. AV will challenge the traditional notion of “location” by making suburban and harder-to-reach areas more accessible for a wider population of individuals. In the far future, when all cars are autonomous and based on car sharing, there will be little to no traffic. For people living in the suburbs, going out for a nice dinner in the city may take a mere ten minutes, instead of the forty minutes with traffic that one would have encountered if they were driving private cars themselves (not to mention the parking hassle). Not only does this save time, but also frees hands and minds to concentrate on other tasks. Commutes to dinner, the office, and meetings could be spent going over emails, resting, or catching up on reading.
This may in turn result in a flattening —or at least a decrease—in real estate prices in areas that have traditionally been very popular such as downtown centers, coupled with increasing prices in areas that have been less popular.
We’ve already seen that ridesharing (especially in urban areas) has decreased the amount of cars on the road. In the future, autonomous vehicles are likely to present a viable transportation alternative to driving for many people—and not just in cities. With dependable and affordable options at their fingertips, people of all ages are likely to ditch their cars in support of autonomous options that they can share or order on demand. With a decline in car ownership, space won’t need to be set aside for parking lots. Since shared autonomous vehicles only require temporary parking while they are being charged, a lot more real estate can be repurposed for other commercial uses.
To put it in the simplest terms, the reduced need for parking lots will create more land availability, and in turn, more business opportunities for the real estate industry.
All of the brilliant startups and music bands in the world that started out of their garage will have to find a new place to foster their ideas. With AV, the classic car garage in a home will be obsolete. The typical American suburban home as we know it will now have an “extra” room-- perhaps for additional housing. Architects designing residential projects will now have a lot more freedom and the ability to customize the space to current needs.
From an architectural perspective, the face of a city may become much greener. Parking lanes may be converted into parks, or even bike lanes. Cities will eventually feel much wider, with open spaces that can be dedicated to urban landscaping and community infrastructure.
If you’re in the business of real estate and tech, stay in the know on what’s happening in the world of AV. Attend that automotive conference and consider partnerships and JVs so you can anticipate future changes and build your product accordingly. The realtech companies of today that will be able to prepare the right infrastructure to accommodate AV will be ahead of the game. And the cars.