Welcome to a new feature here at Get REALty. On a periodical basis, we will write a post on how an emerging technology will affect the real estate industry. You might not think technology has much to do with real estate, or affect how you buy, sell or invest in real estate. As you will learn, however, technology does have a direct impact on the real estate market in a number of different ways.
Topic: Driverless Cars
We love our cars in America. We end up organizing most of our life around our cars. When it comes to real estate, it is no different. We have to live close to work so the daily commute is less of a grind. Our homes come with built-in protection for our cars via a garage or car port. Employers want to be in locations where employees can more easily reach them and at the same time have a places to store their employees’ cars while they work. Even with our leisure lives, many commercial real estate enterprises will design their buildings with parking lots…so many parking lots!
What happens to real estate when we no longer have to drive the cars ourselves? You might think this is a radical question for a technology still years away from being mainstream, but you would be wrong. If you do a search on Google for driverless cars affecting real estate, you find that there has been considerable thought put into how this technology will affect real estate greatly and comprehensively. Lucky for you, we have done our own research on how driverless cars will bring major changes to real estate, which in turn will impact our daily lives.
Here are four ways we see this technology affecting real estate.
1. Lower property values and less appreciation for residential real estate – Believe it or not, one of the main changes driverless cars will bring to real estate deals with value. Many seem to think that property values will go down considerably when driverless cars become the normal mode of transportation. This Forbes article describes the reduction in property values in a twofold manner. First, it takes a great deal of time and effort, which means it is expensive, to move construction materials back and forth between the factory and the residential construction sites. When builders can use driverless trucks to do this for them, the costs of construction will be lowered, which means residential real estate will also be cheaper. Secondly, many people move out of necessity because of work/life changes. When we no longer have to worry about mobility, it drives down the need for people to move. The article highlights elderly individuals as a prime example. Many of these individuals will be forced to move due to the challenges of living and driving to get basic needs. This need disappears when cars don’t require drivers. These homeowners will stay in place longer, driving down demand for housing, which impacts property values and value appreciation directly.
2. Less parking lots and garages – “Where will we park?” is a primary question we ask ourselves before we venture out to the wide world. Driverless cars will eliminate the need for parking completely as driverless cars will either keep moving or drive to a specific location to wait to be called for its next pickup. What happens to all the parking lots and garages currently in place? In this Curbed article, the authors give a great example of developers already planning on a future without the need for parking. The developer AvalonBay is designing an apartment’s parking garage in a way where it can be converted to living spaces later when the garage is no longer needed. Many see these type of advanced thinking as a boon to real estate as it will allow costly real estate to be used for more housing versus places to park.
3. Location, Location, Location will no longer be the real estate mantra – When comes to where we live, most of us will want to live close enough to work to limit commute time. It is one of the reasons why “location, location, location” has always been the mantra of the industry. When cars becomes autonomous, location plays a very different role in our decision making on where we live. In this Bloomberg article, we are introduced to the idea of a stress-free commute that will allow people to basically live where they want to live. One commuter said it best in the article. ”
“Imagine if my entire journey was much more flexible, much more integrated—no waiting round on cold platforms and I could be doing something else from A to B?,” says the 56-year-old father of two. “Would that mean the city effect of increasing house prices spreads further out?”
When you no longer have to worry about location of where you live, it fundamentally changes the way we think about real estate, which leads us to think differently about value of real estate. If you think about all the places we have seen prices appreciate sharply in the last 100 years, many of them deal with the proximity to either major working centers or transportation hubs. There is a reason why it costs so much more to live in a small downtown condo than the suburbs, it is location. When location is taken out of the equation, real estate changes with it.
4. Urban planning will go through a fundamental change – How will our cities change when we have driverless cars? Urban planning will no longer be required to make cars a central focus to the design and development of new building projects. Older structures will have to be reexamined as well. In the Bloomberg article, Google’s Sidewalk Labs is designing a district with the driverless cars in mind. The article points out that street will see major changes including no curbs, which are only put there to protect pedestrians. The Curbed article mentions that 25% to 35% of our urban centers are made up of city streets. How will urban planners reallocate this space to make it more sense in the age of driverless cars? In fact, according to the Curbed article, many in the planning field see driverless technology as being a nightmare before it becomes a utopia. Our streets and buildings are not designed for delivering of people door-to-door and it will cause headaches throughout the entire urban ecosystem. Even the way our cities collect a large percentage of their revenue will see some change as parking tickets will no longer be issued in a world where cars do not park anymore.