By Guelda Voien and Brady Dale, Commercial Observer
To say that the introduction of driverless vehicles will have both macro and micro effects is a macro understatement.
Automation has and will continue to change the way Americans travel, commute and consume, distribute and own things—everyone from economists to Facebook’s Mark Zuckerberg agrees. And driverless cars are on their way. With Intel’s August acquisition of sensor and navigation software firm Mobileye, another major company formally entered the cutthroat race to develop mass-market driverless cars. Both Ford and GM have already acquired software and artificial intelligence companies; Tesla offers an “autopilot” feature, and Elon Musk contends his Tesla cars ship with adequate hardware to go driverless already. The House of Representatives, in early September, approved legislation that paves the way for driverless cars to, well, get on the road. Comparable legislation has been introduced in the Senate.
What will the inevitable shift toward cars that drive (and park) themselves do to the real estate market? That’s one thing no one agrees on, yet.
“I think the future rarely plays out the way people anticipate that it will,” said Seth Pinsky, an executive vice president at RXR Realty and former president of the New York City Economic Development Corporation. “I think it’s very difficult in the real world to know that what you’re doing will avoid obsolescence many years down the line.”
It’s perhaps a fool’s errand to attempt to anticipate what something as profound as self-driving cars might do to any industry, but Commercial Observer learned that many of the largest real estate companies feel that—at this point—they have no recourse but to try.
The general sense is the industry got caught flat-footed with the housing crisis. It doesn’t want to repeat that with self-driving cars.
Tech experts and real estate pros say the possible effects range from different underwriting to societal upheaval. One industry leader believes that a significant percentage of the American workforce could be rendered moot—and how many office buildings will we need when no one has a job? To say nothing of what that does to the housing market.
At the other end of the spectrum are more immediate, practical changes. For instance, it seems likely real estate developers will build less parking in the future, as the personal vehicle fades from view (not that this is as big an issue in New York City as it is in the rest of the country, but it’s certainly something to consider).
Real estate executives find themselves pondering the smaller, pragmatic choices they face as they brace for the pending larger, more fundamental challenges to their business. Changes in demand and valuation for certain kinds of real estate are already being felt, partly in anticipation of driverless cars’ ubiquity and partly because ridesharing is already a preview of the changes we’re likely to feel.
“For every disruption there is opportunity,” said Spencer Levy, the head of research for the Americas at CBRE. “[But] there are going to be unexpected impacts on certain areas of commercial real estate [no matter what].”
Nico Larco, an architecture professor and co-founder of the Sustainable Cities Initiative at the University of Oregon, was less circumspect. “Land valuation should, in theory, go completely crazy,” he said.
If the cost of transport plummets, it won’t matter nearly so much what’s nearby (unless it’s so nearby it’s walkable).
“The things that will retain value will be based on things that are next to it that create buzz,” Larco argued. “It’s not that distance won’t matter, but it will matter less.”
As a result, real estate is atwitter about driverless cars, with both doomsaying and unbridled optimism—at least on the surface—on show in equal measure.
“It’s like, this weird time where it’s obvious this is going to be a transformative moment in real estate,” said Brandon Huffman of real estate investment manager Rubenstein Partners. “There are all types of theoretical social impacts, including job loss across the board.”
The real estate industry might not need to panic yet, because technologists are taking a longer view. Robert Seidl, a managing partner at Motus Ventures, a fund that focuses on transportation and related industries, is surprisingly sanguine about the issue.
“I think we’re a good 10 or 15 years out on a scale where typical pedestrians would see it,” Seidl said. “Just like electric vehicles take up a tiny, tiny part of the electric space, though they have been poised to take off for a long time.”
John Krafcik, the chief executive officer of Waymo, Google’s robocar company, said much the same thing at Bloomberg’s recent “Sooner Than You Think” conference at the Cornell-Technion campus.
“It’s going to be a transformative technology,” Krafcik said, “but it’s going to unfold over quite a long period of time.”