You can probably picture it well: a suburban American neighborhood of neat houses, each with its white-picket fences, long driveway, and two- or three-car garage. It’s a scene that we’re so used to seeing in movies, on TV, and in real life that it’s hard to picture anything else.
Here’s a crazy thought, though: With the rise of autonomous vehicles and ride-sharing, much of what we know and are familiar with when it comes to real estate could change drastically. In fact, according to a report by CBRE Group, “Autonomous vehicles may have the greatest impact on the U.S. real estate markets since mass adoption of the car and expansion of the federal highway system in the 1950s.”
While we don’t yet have the flying cars that transported the Jetsons to their high-in-the-clouds homes, over the past decade the idea of autonomous vehicles has become far less of a fantasy, especially with major automakers (e.g., BMW, General Motors, etc.) and major technology companies (e.g., Google, Apple, etc.) alike racing to take their bite out of the pie.
As of April 2019, Uber had spent over $1 billion on autonomous vehicle technology. GM’s Cruise wasn’t far behind, spending $728 million and expecting to reach $1 billion in 2019. A report by Brookings Institution found that between August 2014 and June 2017, nearly $80 billion was invested in autonomous vehicles by automakers and venture capitalists.
Where is all that money going, a lot of us wonder? According to a report on autonomous driving by the McKinsey Center for Future Mobility, “We expect Level 4 autonomy—operating within virtual geographic boundaries—to be disruptive and available between 2020 and 2022, with full adoption coming later. Full autonomy with Level 5 technology—operating anytime, anywhere—is projected to arrive by 2030 at the earliest, with greater adoption by that time.”
CBRE Group adds, “By 2030 at least 11% of vehicle miles traveled by commuters could be by autonomous transportation; if technological progress is more rapid, more than 27% of vehicle miles traveled could be autonomous.”
So autonomous vehicles are clearly on the rise, but what does that have to do with real estate? Cars are cars, and houses are houses, right? Wrong.
Though it’s too early to determine the impact of autonomous vehicles and ridesharing on real estate in terms of numbers and value, the potential looks enormous.
For one thing, as we’ve already seen with ridesharing (especially in urban areas), autonomous vehicles are likely to present a viable transportation alternative to driving for many people—and not just in cities. With dependable, affordable options at their fingertips, people of all ages are likely to ditch their cars in favor of autonomous options that they can share or order on demand. With a decline in car ownership, people won’t need large garages in their homes, nor will so much space need to be set aside for parking lots in apartment complexes, office buildings, shopping centers, downtown areas, and more, given that autonomous vehicles that are shared and in use only require temporary parking, while they are being charged.
Much of the precious real estate currently used for parking can thus be repurposed for additional housing, green areas and parks, and other city and community infrastructure. Parking lanes in cities, for example, can also be used instead for bike lanes and public transport that can serve a wider population at once.
“Location” takes on a new meaning
Real estate has long been defined by the trope “location, location, location.” In the real estate industry, the value of a property is typically determined by its proximity to downtown areas, public transportation, commercial centers, institutions such as universities, known talent pools, and so on. Much remains to be seen about the effect of autonomous vehicles and ridesharing on real estate prices, but the two trends may be able to challenge the traditional notion of “location” by making remote, harder-to-reach areas more accessible for a wider population of individuals. This may, in turn, result in a decrease—or at least a flattening—in real estate prices in areas that have traditionally been very popular, coupled with increasing prices in areas that have been less popular.
Shaking up commutes
According to a Deloitte report on shared and self-driving cars, “Over the years people have gradually adjusted their lives to their living conditions, including the location of their homes relative to their workplace, such that the average commuting time stays approximately constant at one hour.” But the notion of commuting is likely to change tremendously if people don’t actually have to do the driving and can instead spend the time working, resting, or doing other things. Plus, the internet connectivity powering the whole experience of autonomous vehicles means that riders are also likely to have access to great internet and media throughout their entire ride, making it more enjoyable and productive.
While the near future isn’t likely to look like the world of the Jetsons, it’s increasingly becoming clearer that our future neighborhoods and commercial centers won’t look like they came straight out of the Stepford Wives either. Indeed, autonomous vehicles and ridesharing have the potential to significantly shake up real estate as we know it.