Real Estate & the Transportation Revolution
The real estate implications of what Bill Ford has called “the mobility revolution” go beyond parking facilities, although the effects on that property sector will be considerable. Research from Green Street Advisors and the Urban Land Institute, prepared for ULI’s Fall Meeting this week, finds that many assets across a number of sectors are likely mispriced because today’s underwriting doesn’t factor in the coming changes in real estate brought on by ride-hailing and autonomous cars.
“Ride-hailing (e.g., Uber) and driverless vehicles will combine to dramatically reduce transportation costs and time,” according to Green Street and ULI. “A decline of vehicle ownership could cut parking needs in half within three decades. The 75 billion square feet of parking space to be eliminated is more than the US apartment, office, mall, strip center and industrial sectors combined. The impact on land values will be broadly deflationary.”
That being said, retail—or specifically, high-quality infill malls with densification opportunities—will be among the winners. “Implications are likely unfavorable for self-storage, billboards, transit-oriented residential and commoditized retail,” says Dave Bragg, managing director at Green Street.
Infill malls can boost their value by transforming excess parking into alternate uses, according to the Green Street/ULI report. And CBD office could benefit from workers’ experiencing “faster, cheaper, and less stressful commutes.”
On the other hand, self-storage is likely to be challenged as a decline in car ownership frees up significant residential garage space. Similarly, billboards should suffer from the rise of driverless vehicles as commuters focus on work or entertainment instead of watching the road, predicts Green Street.
While noting that “it is too early to tell how the coming revolution in transportation will unfold,” Green Street makes it clear that the impact will be dramatic. “Ride-hailing marks the beginning of the transportation revolution,” according to the Green Street/ULI report. “It is in the early innings, but services such as Uber and Lyft are having a big effect on consumer behavior around the world. The impact on the taxi and car rental businesses has already been devastating.”
And while “many potential roadblocks exist and the timing is unknowable” for the advent of driverless cars, Green Street cites “recent technological and regulatory progress” in favor of this mode of transportation. “A reasonable base case upon which to center an analysis of the impact on real estate is that of a mass adoption of driverless vehicles beginning around 2030 and completed about 15 years later,” the report states. “Driverless vehicles will be both owned by households and utilized by ride-hailing services.”