I sent an abridged version of this article to Real Estate Business Online. The following is the full text. The ‘smart belt’, ‘selfie stick’ and ‘iPhone 7 Lightning to 3.5mm Headphone Jack Adapter’ are just a few examples of technologies that somehow fail to actually bring anything practical to this begrimed world. If you’re like me - waiting for the fourth industrial revolution to come up with anything more practical than a pair of bluetooth chopsticks - you’re going to love autonomous vehicles.Imagine if we could:
- Reduce the number of traffic accidents (1,209 Australians died in car accidents last year alone, and even that is extremely low by some international standards).
- Reduce traffic congestion through the use of sensors and increasingly clever algorithms.
- Give the elderly, disabled, unlicensed, inebriated and youth a better means of getting around than public transport.
- Be able to read a book, watch a movie or do some extra work while you’re being shuttled around like Knight Rider.
And that’s before we even get into the environmental ramifications. You can rock back and forth on your porch shaking your fist all you like. The benefits are clear. There’s no stopping this crazy train.The race to be the first big self driving car company is well underway. Virtually every car company you can think of - Tesla, General Motors, Ford, Nissan, Toyota, Volkswagen, Fiat-Chrysler, BMW - are already developing their own versions. Not to mention the amount of money companies like Apple, Uber and Google are pumping into their own autonomous vehicle programs. And if Google and Uber’s current business models are anything to go off (and they are) it would be foolish to think that self-driving car owners are going to be the only ones with access to this technology.In fact, a fleet of autonomous Ubers are already on the streets of Pittsburgh - with projections by CEO Travis Kalanick for Uber’s entire fleet to be driverless by 2030. Even Ford have announced plans for “fully automated, driverless vehicles for commercial ride-sharing” by 2021.Thanks to ride-sharing, everyone is soon to see the benefits of this new technology. It’s not just going to be a luxury for the opulent. We won’t have to wait nearly as long for the technology to become cheap enough to saturate the automobile market completely. The effects of autonomous vehicles are going to be seen in urban development much sooner than we think.The advent of self-driving cars raise a lot of questions. How many taxi drivers - for both Uber and traditional services - will be left jobless? What’s future does the car insurance industry have? What will happen to the trucking industry? Public transport? What happens when the government loses all its traffic citation revenue? Most importantly to us in real estate, however, is the implications this technology has on city planning and development.
Suburban real estate could become more popular
Cities are some of the best places to live - but also the most expensive.Being big, bustling icons of capitalism, they’re full of jobs. What’s more, they’re the ultimate ‘work/play field’. For the vast majority of nine-to-fivers, a healthy relationship between a professional and social life requires plenty of people, and as little time wasted travelling as possible - both of which the city provides.Suburban real estate, on the other hand, is definitely preferable if you’re looking to save money. The problem is, a tremendous amount of Suburbians still work in the city. The cost of admission is thus, for most, travel time.But what if travel time wasn’t ‘lost’ anymore? What if you could use it for recreation, eating, sleeping or work? What if your morning and evening commute afforded you an extra hour to read, sleep, work, or catch up on some Netflix? If you’re not actively driving your car, you can do whatever you want.As the burden of travel is lessened, it would make sense people would be more likely to agree to longer commutes - ergo expanding the urban and suburban sprawl further.
Suburban development means commercial development
But the great exodus from the city won’t just mean a boom in suburban residential real estate. People might be willing to travel longer for work - but they’re still going to want to buy their bread and milk locally.Growing out suburbia means the opportunity for more commercial real estate outside of the city.The city will remain the great, overarching hub - but self-driving cars are sure to gentrify the outskirts tremendously. We probably won’t be seeing any high-rises cropping up too far out of metropolitan areas - but commercial real estate developers and marketers are sure to have their work cut out for them over the next few decades.
Nicer, more livable cities
Another effect of the hordes driving into the city every day for work: 31% of the central business districts of the USA have been paved to put up parking lots.Obviously, we’re still going to need places to park cars. Autonomous vehicles aren’t going to prowl the streets forever. They need to refuel somewhere. It’s likely the vast majority of the fleet will be ‘nesting’ in recharging ports when not in use - and there’s no need for these to be in the city. They’ll likely be situated on the outskirts of cities - leaving an abundance of car parks unused in urban areas.So what will we do with all this added space?Sure, a lot of the privately owned car parks might be sold off to property developers. However, if these are council owned (like a lot are) it’s more likely that we’ll be converting the space into something a little more fun for the taxpayer. Green areas, playgrounds, community centres - who knows?
Ride sharing: more cars or less?
Simply calling a self driving car to pick you up is going to be of huge benefit to city-dwellers. But some argue that the main benefit of self driving cars (less cars and traffic congestion) might not actually be the reality of the technology.With automation comes efficiency, and with efficiency comes savings. But when something becomes much cheaper, we hardly use it less. In fact, we use a lot more of it. As it becomes cheaper and cheaper to have an autonomous Uber drive you around, it’s entirely possible people will start taking them everywhere.On the other side of the coin, we’re also likely to see public transport automated in due time. Public transport is generally government subsidized and can move far more people at once. Busses, for instance, will soon be so cheap (probably even free) and punctual people will actually want to use them.Only time can tell which way this will go.
Less parking and added ROI for property developers
Cheaper ride share services and public transport is likely to further convince ownership-shy millennials not to bother buying a car at all. And people losing interest in purchasing their own cars is good news for property developers.Underground parking in high-rise apartment blocks has been known to absolutely burn through their profits - but historically, have been an essential part of apartment buildings.The taller the apartment building, the deeper into the earth we need to drill to fit in all the required car parks. Oftentimes, a highrise is actually an extra third of the size - it’s just that extra portion is buried underground.Perhaps not for so much longer? Self driving public transport, automated taxis on an on-demand basis, and hipsters’ new obsession for pushbikes with one gear might mean cheaper rent for residents who choose not to own a car - and fatter pockets for property developers.
Self-driving trucks and industrial real estate
We’ve looked at cars and public transport - but autonomous vehicles aren’t just about moving people. In fact, Uber has recently purchased a new start-up company Otto: a self driving truck company.Why? The freight industry is arguably a more profitable market for autonomy.Because truckers need to eat, sleep and go to the toilet, we need to make their trips as short as viably possible. This means relying on the spoke-hub distribution paradigm: manufacturers supply large regional distributors, which supply local warehouses, shops, and eventually, your home.But imagine if trucks never had to stop? (Except to refuel of course). Industrial properties could afford to be further and further from shipping ports, cities and farmland, opening up a huge market of previously too-impractical-to-sell industrial real estate.On the other hand, as autonomous trucks get cheaper and cheaper as the technology evolves, industrial properties, factories and warehouses might actually get smaller and more local as distributors begin delivering goods directly to consumers (think Coles and Woolworth’s home delivery programs). Living close to a warehouse could suddenly, in a miracle of technological evolution, actually be a selling point.
When will this happen?
Uber already have automated cars on the road (under heavy monitoring, though). Tesla have released an almost-self-driving ‘autopilot’ mode for their model S, which you can already go out and buy. Volvo have announced their self-driving car will be available by next year. Audi, too, have projected their A8 will be available, and driverless, in a similar time frame.That being said, this isn’t going to be some overnight, Pompeii-esque shift in the way we live. Sure, as changes of this caliber go it’s going to be quick - though it’ll take some time for driverless cars to emerge and take over, and even longer for our cities to reflect this change.The timeframes might be unpredictable at the moment, though we do know for sure is that these changes will happen. Once upon a time, the luddites were afraid of trains taking over the humble horse and cart. Look how well that turned out for them. Prepare yourself for the self-driving future.