How will Electric Vehicles Impact Commercial Real Estate in Alberta?

A Stanford University economist, Tony Seba, recently made two extraordinary predictions for the next 8 years:

  1. All vehicles sold world-wide will be electric;
  2. All vehicles will be self-driving.

He also believes that the long term price of oil will drop to $25 / barrel as a result of this seismic change.

To be clear, Seba is not a random guy making an unfounded prediction.  After all, he is an instructor at one of the world’s top universities and holds a MBA from Stanford and a B.S. in Computer Science and Engineering from MIT.   We also think his report has a few well thought out points.  With an internal combustion engine consisting of 2,000 moving parts, it sounds completely reasonable that an electrical vehicle (EV’s), with only 20 moving parts, would cost less to maintain.  Combined with lower costs to “fuel”, EV’s offer the potential for much lower overall costs of operation.  Seba argues that we’ll hit a point in the next few years where EV’s are also cheaper to buy.  Cheaper acquisition costs + cheaper operating costs + cheaper maintenance = the death of gas combustion engines.  At least that’s his argument.

While many might doubt this will happen (or at least so soon), Volvo just announced they will be phasing out solely gas combustion engines as they shift entirely to electric or hybrid cars by 2019.  Volvo won’t be the last car manufacturer to make this transition either.  Especially when they look at the success and market demand that Tesla has experienced.

We are not supporting Seba’s forecast, but it would be naïve to suggest that a dramatic change in gas demand would not have potentially dire consequences for energy companies and oil producing countries.  Correspondingly, this could have a big impact on commercial real estate in Edmonton and Alberta as a province.  At this point, we don’t see gas combustion engines ever being fully eradicated, but it’s undeniable that EV’s will continue to grow in popularity.

We also acknowledge that Seba wouldn’t be the first person to sell sensationalism.  After all, few people would be interested in hearing from an economist that predicted the future will be largely the same as it is today.  Big ideas sell, and Tony likely stands to benefit from all the publicity, including from our very influential commercial real estate blog 😉

We would love to hear your thoughts on this.  What’s your long term outlook for oil prices?  What will the landscape look like in 8 years, or 20 years?

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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7 thoughts on “How will Electric Vehicles Impact Commercial Real Estate in Alberta?

  • You guys are so gullible…this is just BS propaganda…everything needs oil even the computer and keyboard you used to write this crap…you’ll be eating youre words once oil goes back to 70$…keep drinking the green coolaid you libtards

  • Chad, this is an extraordinarily timely and interesting topic. There is little question that our culture is moving in the direction of Tony Seba’s thesis: electric; and self-driving vehicles. This doesn’t necessarily translate into the imminent end of oil, but it certainly presents a variety of opportunities to explore. The Edmonton (and Alberta) economy is becoming increasingly diverse as oil producers become increasingly efficient; there will continue to be demand for commercial real estate. What other sweeping changes might be on the horizon? With the prospect of fewer vehicles comes decreasing need for parking lots/spaces, roads, and public transportation corridors, and other vehicle-oriented businesses. What exciting community and commercial uses might arise from space freed up by this shift? Here in Edmonton, City Council is already wisely considering some of these questions. Elsewhere, thought-leaders, like Peter Diamandis, are educating us about exponential growth enabled by technology. These are exciting times!

    • Hi Jeff, thank you for the thoughtful comments. We agree completely, it won’t spell the end of oil, nor will it being our resilient economy cannot adapt. You ask some great questions. What happens to parkades, garages and parking stalls in general if we start shifting to self driving cars? Our City Council had the foresight to allow Uber to operate, a decision that seems so logical now but was very controversial at the time, so we hope they are looking further down the road as well. We’ll have to look into Diamandis, thanks for the suggestion!

  • – It takes approximately 5 years, and $500 mil. (US) to develop a single new car.
    – Best estimate on the availability of autonomous technologies in cars is 2025
    – Estimates are that autonomous technology will add $5000 to the cost of each car

    In my humble opinion, and given these data points, Tony Seba’s two predictions are impossible.

    • Thanks for the comment Geoff. While I’m no fortune teller myself I’m often reminded of when Steve Ballmer of Microsoft infamously predicted “there’s no chance that the iPhone is going to get any significant market share”. Granted it’s a completely different category, but it illustrates how smart people can often be completely wrong.

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