As a master planner, Robert Moses, once viewed as one of America's most powerful people, got a few things wrong. Arguably his biggest miscalculation was his idea that building more highways would eliminate traffic congestion. He was a huge a believer in the positive impact of the automobile; it was the bases for his entire vision for redesigning the New York Metropolitan Area's infrastructure. But anybody who has missed a meeting due to traffic on the Belt, LIE or Cross-Bronx can tell you that these thoroughfares made things worse -- a lot worse.
More roads meant more cars, more congestion and the eternal marginalization of public transit. In commercial real estate, this has meant that location is numero uno, and will remain so until something fundamentally changes. And yet, that day could come sooner than anybody could have imagined.
The most innovative car brands, such as Mercedes-Benz, Volvo, BMW, Audi and Tesla, are already integrating self-driving features into new cars, and BI Intelligence estimates that, by 2020, some 10 million semi- or fully-autonomous cars will be on the road. These cars will ultimately bring with them fundamental changes to commercial real estate -- not the least of which will be location as the disproportionately large determinant of real estate value, a concept that is as old as civilization itself.
In 1994, Italian physicist Cesare Marchetti concluded that the average round-trip commute to work will remain as constant as it has been since the hunters and gatherers. He posited that acceptance of the one-hour roundtrip commute is instinctively ingrained into the human psyche. But this is more a matter of maximizing productivity rather than the desire to get more face-time with colleagues. If you can sit in your backseat -- listening to Spotify -- as you work on any task you need to complete, while artificial intelligence “platoons” your car, what difference does that extra 30 minutes make? You'll be just as productive and may get some more "me" time (as long you finish that TPS report quickly).
On the opportunity side of the ledger, multifamily developers will have more choices, and retail developers will have more markets to serve if people are willing to plant themselves 10 to 15 miles further from the office. Because computers will be better at maneuvering into spaces than humans, office building owners will also benefit from better parking ratios as more cars are squeezed into smaller spaces.
The ability to monetize more of their property, rather than having to maintain larger parking lots, will drive increased ROI. But nothing good comes without a cost, and there will be some challenges for the office sector, challenges that will force owners to ask the following questions:
How will I need to modify my property’s road access points and flow patterns to accommodate more traffic? Fewer people will utilize trains and busses as autonomous cars and mobility as a service (MaaS) options, like self-driving Uber and Lyft vehicles, gain mass adoption .
Are my common areas up to standard? Workers will spend more time in the lobby, cafe or outside areas as they wait for their vehicles to pull up. This means there is no room for slack when it comes to landscaping, available seating and decor.
What about my garage? Over the long term, greater garage density should be a net-plus, but making it happen could require investments in technology, engineering and architecture. How many parking garages have you seen that are ready for hundreds of GPS-dependent robotic cars moving in and out during rush hour?
For all his well-documented failings, Robert Moses knew that people will pretty much do anything to avoid mass transit as long as they can still get stuff done. While it looks increasingly doubtful that we’ll be in full-on flying-car mode, four years from now, there’s little debate that big changes coming -- and they may not be as far off as it might seem. Who’s ready?