The Future Impact of Self-Driving Cars on Commercial Real Estate

Self-driving cars are going to change the real estate landscape as we know it.  Before we dive into the impact it will have, we’ll start with an overview of some recent events surrounding the burgeoning technology.

First, big auto manufacturers, technology companies and different levels of government have already invested billions of dollars and significantly more is on the way.  Ford recently announced plans on having self-driving cars by 2021. These won’t be cars with just an auto-pilot feature either; the goal is fully autonomous cars in which steering wheels and pedals will be absent altogether. Google also plans on removing the driver from the experience and to date has driven more than 2.5 million kilometers in their project vehicles. Having already disrupted the taxi industry, Uber’s CEO, Travis Kalanick, believes “it starts with understanding that the world is going to go self-driving and autonomous.” After buying Otto for a reported +$600 million, Uber is currently conducting tests with driver-less trucks across California highways. Elon Musk of Tesla is even more bullish and believes self-driving cars will be on the road within two years, going so far as suggesting “it’s a much easier problem than people think it is.”

Governments are getting behind this as well. Pittsburgh has welcomed Uber’s self-driving cars (which will still have technicians sitting behind the driver’s seat until the bugs are worked out). Michigan is in the process of debating new regulation that will allow self-driving cars in the entire state.  President Obama has also proposed investing $4 billion over the next 10 years specifically to fund the testing of self-driving cars.  The combination of private investment and government interest are advancing this technology at a very quick rate.  We believe self-driving cars are inevitable, now it’s just a matter of time.

So how will this impact real estate? Our vision is ultimately predicated on two significant assumptions. First, self-driving cars will become ubiquitous. In other words, everyone will use one and perhaps even more critical, autonomous cars will eventually become the only option. Second, vehicle ownership will transfer from individuals to corporations. This change could take decades, but the premise is self-driving cars will constantly be in motion, unlike today’s model where a vehicle can be parked 95% of the time. If vehicles are always on the road, drivers – correction: passengers – won’t take the same car twice. As the technology continues to advance and the entire ecosystem moves alongside it, individual ownership will become more expensive and cumbersome. Accordingly, we’re predicting that the majority of future vehicles will be corporately owned. Naturally, there is a chance that neither of these assumptions comes to fruition, but we think this is the trajectory.

With that in mind, we’ll first look at the future of the residential industry. Perhaps the biggest change we can see is the potential for future houses, duplexes, townhouses and apartment buildings to be built without garages or parking spaces.  After all, as vehicles become self-driving, the vehicle itself would continue commuting other passengers instead of being parked. If people don’t own cars, there would be no need for all the infrastructure surrounding it. Future residential neighborhoods wouldn’t require as wide of roads for street parking and alleys could be eliminated altogether. Future houses could look radically different when the garage is removed from the design, and existing garages could be converted into additional living space. Also, since commuting is expected to become more efficient, additional people may consider the suburbs. Indeed, the whole urbanization of a city and people’s habits could influence how entire cities are re-shaped.

From a commercial perspective, the potential implications are profound. As parking spaces become obsolete, a healthy percentage of every property becomes suitable for something else. Businesses and building owners could convert parking lots into more functional space or even expand the building. Notwithstanding the massive shift away from parking infrastructure, anything related to the automotive industry will be in jeopardy. Will there be a need for autobody shops if self-driving cars alleviate accidents? Will auto mechanic shops exist if the majority of the world’s cars are corporate owned (i.e.,/ Google, Uber)? If that were the case, those companies would surely bring repair work in-house. Will there be gas stations? Again, corporate-owned vehicles would undoubtedly fuel at their own facility. That is, of course, assuming there are still gasoline-fueled vehicles. A phase-in of autonomous cars could take many years still, so this won’t occur immediately. Looking out 10 – 20 years, however, it’s conceivable that we won’t have parkades, parking lots, gas stations, auto body or mechanic shops whatsoever. There will be other changes as certain industries, such as insurance or car financing, will have to adapt. There could be a dramatic shift away from these types of jobs, but we suspect they will be replaced as other technology-related industries grow.

Although online shopping continues to grow, we still expect to see demand for bricks and mortar retailers, coupled with an increase in demand for recreational options. Not only are self-driving cars expected to eliminate accidents, but they will also eliminate traffic jams. If people spend less time in their vehicles they will conceivably look to fill it with shopping and entertainment (perhaps go-karting will spike so people can still get their driving fix).

Outside of the impact on real estate, Inc. magazine just posted an article describing 99 ways self-driving cars will change our lives.

We are indeed on the cusp of a revolution.

Our Team

CHAD GRIFFITHS

CHAD GRIFFITHS

Partner

Chad is a partner with NAI Commercial and has finished as a top 15 producer Canada-wide for the past three years. Chad owes his success largely to his commitment to uncompromising client representation, his active involvement in the real estate and business communities and a lifelong pursuit of continuous learning.

RYAN BROWN

RYAN BROWN

Partner

Ryan is a partner with NAI Commercial Real Estate in Edmonton. He is currently ranked nationally as one of NAI’s top advisors in Canada. Having completed his Bachelor of Commerce majoring in Finance, his eye for detail and great understanding of the numbers associated with any business decision makes him an asset to his clients while providing them the highest level of service.

DARCIE BOUTEILLER

DARCIE BOUTEILLER

Associate

Darcie began her career in Commercial Real Estate after completing her studies in Business Administration. Her personable nature coupled with a results-driven attitude is a perfect match for customers. Darcie understands the importance of delivering a custom, accountable solution for her clients.

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