Companies ranging from the big automakers in Detroit to tech firms in Silicon Valley are pouring research dollars into driverless cars, and this development is projected to completely change the future of commercial real estate. This transition creates opportunities for new investment as well as challenges for existing properties.
Demand for parking
The biggest effect of driverless cars will be a reduction in demand for parking. As cars become fully autonomous, passengers can be dropped off at their final destination and continue to pick up other passengers or park themselves in outlying areas. The reduction in parking demand will affect both central business district properties as well as residential. This will create opportunities for existing properties with a surplus of parking availability, as the existing parking can be converted to productive use such as expanding retail spaces or adding residential units.
The biggest challenge will be for parking lots in downtown areas. As cars can spend less time parked, the demand for expensive parking located near downtown could fall dramatically.
The change in parking needs will fuel a continuation of the trend of mixed-use retail developments. With little need for parking, it becomes easier for visitors to visit, driving up foot traffic. With a mixed-use development, visitors can be dropped off directly to their destination and have an opportunity to explore an environment developed to encourage walking. Retail and entertainment establishments benefit from the increased number of people in the development and the development does not have to plan around direct access from the street to parking availability.
Street frontage demand
The new development will be built with increased density and more street frontage. Currently, a design has to accommodate easy access from the street to the parking area. This restriction reduces access and visibility from the street and reduces the area available for productive use. New developments can be designed around a small area for loading and unloading passengers with the prime space available closest to the designated drop off spots.
A reduced need for parking and the surrounding infrastructure will allow buildings to be located closer to each other, increasing pedestrian traffic between neighboring developments. No longer will visitors need to traverse parking lots to move between properties.
Impacting hotel placement
One area sure to see challenges is the hotel industry. A network of hotels and motels have been developed near highway interchanges to provide accommodations to long-distance travelers. However, as travelers will have the opportunity to relax and even sleep as they cruise down the highways, demand in these locations will drop even as the demand closer to city centers stays strong without the requirement to pay for parking. Hotels outside city centers will need to find ways to draw visitors to replace this drop in number. Options include adding novelty attractions or unique dining options. After all, travelers will still need to stop for food!
Driverless cars present a definite opportunity but high risk for projects currently in development. No one is quite sure how changes in commercial real estate will shake out, but those who guess right stand to earn high returns on their investment.
*Printed with permission from NAI Global*