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Date: September 5, 2017
Category: Real Estate

Location, Location, Location: Self-driving Cars and Real Estate

If you’re an average American, your morning commute probably involves about 26 minutes in your car.1 That means about five hours of your work week are spent fighting traffic in a vehicle you own.

Now, imagine the driverless future. In the morning, you hop into a self-driving car owned by a company like Lyft or Uber. You flip open your laptop and start working while your vehicle drives you quickly and safely to the office for less than the cost of a morning latte. Instead of a stress-inducing grind, your commute becomes productive time. And after dropping you off, the car heads off to pick up its next rider instead of spending the day sitting in a parking lot, making it more productive too.

This may seem like an impossible dream, but much of the technology that will enable driverless cars—sensors, light detection and ranging (lidar), and intelligent algorithms—already exists. Companies ranging from Google to Tesla to Uber are already road-testing fully autonomous vehicles. Optimists like Tesla’s CEO Elon Musk predict that driverless cars will be on the road within 10 years, and even more-pessimistic observers foresee the technology becoming available within 20 years. Legislation and policy issues may slow down adoption as governments work to ensure safety standards, but we could be living in a self-driving utopia by 2037.

The driverless revolution will dramatically change how we live. If you want to imagine it, consider the impact the automobile had. Before cars, people crowded into cities where they could use streetcars or walk, or they lived in the country and made do with a horse or bicycle for local travel and trains for longer trips. Once cars hit the road, however, suburbs sprang up with their malls, winding streets, and attached two-car garages. Our modern lifestyle wouldn’t exist without the widespread adoption of the personal vehicle.

The impact of driverless cars on our lives and our cities will be no less dramatic. Let’s look at some of the ways autonomous vehicles may change things.

Parking

Right now, parking, especially in major cities, is a high priority. When developers propose new apartment communities, they’re required to include plans for up to two parking spaces per resident. Whole city blocks are dedicated to low-rise parking lots, and owning a permit to park in the city is a lot like holding a Willy Wonka Golden Ticket. The advent of self-driving cars would change all of this.

Once consumers start to adopt autonomous cars, and especially once companies start to operate low-cost, 24-hour autonomous fleets, the need for parking in the city will drop significantly. Cities could get by with a few mega lots located outside the urban core.

When that happens, the parking requirements for new developments could be dramatically lowered, perhaps to as little as half a space per resident or less. This would significantly lower the cost of development and increase the square footage devoted to apartments or retail, which could potentially make downtown living much more affordable.

As for the huge parking lots that currently exist, they could be redeveloped into more-productive, higher-value retail or commercial space, freeing up large chunks of new land for development. In short, self-driving cars could make city living more attractive.

Speed and comfort

On the flip side, driverless cars could also make the suburbs more attractive.

If a driverless commute is a period of productive time, the length of time that people are willing to spend commuting may increase. After all, if you can start your work day in your “mobile office” and get an hour of work done before you step into your physical office for meetings, then a longer commute isn’t a waste of time. People may be more willing to live further away from the urban core in which they work.

At the same time, driverless cars may be able to travel more quickly and safely than traditional cars. Driverless cars would be capable of something called “platooning”, which essentially means driving at very high speeds very close together. This would speed up drive times and allow more vehicles to pack onto the road, so people could travel further, faster. This, again, may make living further from the urban core more appealing.

Finally, if suburban dwellers no longer need a personal car, they also wouldn’t need a two-car garage. Suburban home design would change, with more living space where the garage used to be. This may make suburban living more attractive to some.

The bottom line:

However you slice it, self-driving cars will change the way we live. And that means major changes ahead for real estate.

1 Washington Post. The Astonishing Human Potential Wasted on Commutes. 2/26/16.

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